Consumption in Greece

Greece - Consumption

Economy records slowest increase since Q1 2021 in Q3

Activity softened in the third quarter, with GDP expanding 2.8% year on year (Q2: +7.1 yoy). Q3’s reading marked the lowest growth since Q1 2021.

The downturn was broad-based, with private consumption, public spending, fixed investment and exports all weakening. Private consumption growth waned to 6.2% year on year in Q3 from an 8.9% expansion in Q2, dented by higher inflation during the period. Public consumption fell at a steeper rate of 2.9% in Q3 (Q2: -1.3% yoy). Meanwhile, fixed investment growth fell to 7.7% in Q3, constrained by tighter financing conditions (Q2: +9.8% yoy).

Exports of goods and services growth fell to 0.9% in Q3 (Q2: +18.8% yoy) in line with a worse-than-expected tourist season, while imports of goods and services growth moderated to 5.2% (Q2: +14.5% yoy); both marked the lowest readings since Q1 2021.

On a seasonally adjusted quarter-on-quarter basis, the economy contracted by 0.5% in Q3, contrasting the previous period’s 0.6% increase. Q3’s reading was the first sequential contraction since the outbreak of the Covid-19 pandemic in Q2 2022 and indicated that underlying momentum is fading.

Turning to the fourth quarter, the economy is seen shrinking again in sequential terms. Downbeat manufacturing PMI readings in October and November suggest that industrial activity is weakening, while higher interest rates should be taking a toll on private spending and investment. Additionally, a more challenging international backdrop is likely slowing the external sector further. That said, the government’s energy subsidies managed to slow inflation in October and November and are providing much-needed relief to households and firms.

Analysts at the EIU commented on the outlook:

“We expect the disbursement of EU recovery funds to support real fixed investment growth in Greece, which we forecast will average about 10% over our forecast period. However, there are downside risks from the energy crisis and monetary tightening, and the recovery will only partly offset the severe depletion of Greece’s capital stock during the previous economic crisis.”

FocusEconomics panelists see GDP growing 1.4% in 2023, which is unchanged from last month’s projection. In 2024, the panel sees the economy expanding 2.4%.