GDP growth records fastest upturn since Q2 2023 in the first quarter

GDP growth picked up to 0.7% on a seasonally adjusted quarter-on-quarter basis in the first quarter, from 0.3% in the fourth quarter of last year. Q1's reading marked the best result since Q2 2023. On an annual basis, economic growth improved to 2.1% in Q1, following the previous quarter's 1.3% expansion. Q1's reading marked the best result since Q2 2023.

The sequential improvement was largely due to a rebound in fixed investment, which grew 7.1% in Q1, contrasting the 2.2% decrease in the previous quarter. Less positively, private consumption growth moderated to 0.2% seasonally adjusted quarter on quarter in Q1 compared to a 1.5% expansion in Q4. Moreover, government consumption dropped at the sharpest pace since Q4 2023, contracting 2.7% (Q4 2023: +1.8% s.a. qoq). On the external front, exports of goods and services contracted 2.4% in Q1, marking the worst reading in two years (Q4 2023: -0.7% s.a. qoq). Meanwhile, imports of goods and services deteriorated, contracting 0.6% in Q1 (Q4 2023: +0.9% s.a. qoq), marking the sharpest drop in a year.

The Consensus is for the economy to grow at a similar pace to Q1 throughout the remainder of 2024. Fixed investment is set to benefit from EU fund inflows, while private spending should remain supportive amid subdued inflation. The evolution of the Middle East and Ukraine wars remain key factors to track.

Analysts at Goldman Sachs commented on the investment outlook: “We see a solid potential for investment in production capacity to pick up considerably this year in Greece. The disbursements of the European Recovery Fund (RF) should peak in 2024, potentially reaching EUR 9bn (4% of GDP), and the programme will turn increasingly toward capital expenditure support starting from 2024. Under full implementation, we estimate that the RF impulse could be as large as 1.7pp. Under relatively more cautious assumptions (80% implementation), non-residential capital investment could grow at twice the pace of the rest of the Euro area in both 2024 and 2025.”

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