Consumption in Greece

Greece - Consumption

Economy records best result on record in Q2 on low base effect

GDP bounced back solidly, growing 16.2% in Q2 and contrasting the 2.3% contraction tallied in the first quarter, as the easing Covid-19 restrictions spurred activity. That said, Q2’s jump—which marked the best reading on record—was largely driven by a low base effect.

The second quarter’s upturn was largely attributed to a sizeable improvement in household spending. Private consumption growth accelerated, growing 13.2% in Q2 in annual terms and well above the 3.7% expansion tallied in the prior quarter, logging the quickest expansion in at least a decade in the process. Similarly, fixed investment growth sped up to 12.9% in Q2, from the 10.6% expansion logged in the previous quarter. Conversely, government spending growth waned to 6.1% in Q2 (Q1: +8.1%).

On the external front, exports of goods and services rebounded, growing 22.6% in Q2 on a year-on-year basis (Q1: -10.9% yoy). In addition, imports of goods and services rebounded, growing 22.5% in Q2 (Q1: -3.3%).

Lastly, on a seasonally-adjusted quarter-on-quarter basis, economic growth moderated to 3.4% in Q2, following the previous period's 4.5% growth. Q2's reading marked the slowest expansion since Q2 2020.

The economy is seen growing healthily this year, on the back of firming domestic and foreign demand. Moreover, the EU’s recovering spending coupled with the ECB’s loose stance is expected to further buoy activity. On top of this, relatively loose travel restrictions in the region will have ignited tourist activity in the peak months of July and August, further bolstering the external sector. That said, surging numbers of Covid-19 infections and the threat of tighter restrictions cloud the outlook.

FocusEconomics analysts see GDP expanding 4.9% in 2021, which is down 0.2 percentage points from last month’s forecast. In 2022, the panel sees GDP growth at 4.9%.