Greece: Recovery continues at modest pace in Q2
September 1, 2017
A provisional dataset released on 1 September by the Hellenic Statistical Authority (EL.STAT) revealed that the economy performed slightly better than projected in the second quarter, as the expected slowdown in activity failed to come to fruition. GDP increased 0.7% over the same period of 2016, a slightly better performance than Q1’s revised 0.6% expansion (previously reported: +0.8% year-on-year). The result contrasted market analysts’ expectations of a slight slowdown to 0.5% growth and confirmed that the economy’s recovery remained on track in Q2, albeit at a meagre pace.
Q2’s acceleration was chiefly due to a better performance by the external sector. Exports grew at the fastest pace since Q1 2015, expanding 8.7% annually. Robust tourism revenues likely drove the fast growth as the sector has become the economy’s lifeline since the crisis. Meanwhile, import growth slowed in the second quarter, coming in at 4.3% (Q1: +19.0% yoy), reflecting the weak state of domestic demand.
Looking at the domestic side of the economy, government consumption rebounded in Q2, expanding 3.3% annually after a 1.9% contraction in Q1. However, household spending was meagre and rose 0.4%, the slowest pace since Q2 2016. Although gains in the labor market have materialized, Greece’s unemployment rate remains high and continues to weigh on private consumption. Fixed investment dropped 4.9% in Q2, notably contrasting Q1’s 12.7% increase. Investment figures have been volatile over the past year, largely reflecting the uncertain atmosphere in the country.
On a quarterly basis, the economy grew 0.5% in Q2 in seasonally-adjusted terms, which matched Q1’s result. The stable reading suggests that the economy is slowly embarking on a path to recovery, although the overall state remains challenging despite numerous reforms and bailouts.