Greece Private Consumption (ann. var. %)

Private Consumption in Greece

GDP growth accelerates in the fourth quarter

GDP growth improved to 5.2% year on year in the final quarter of last year from 4.4% in the third quarter.

Household spending growth fell to 4.2% in Q4, marking the weakest expansion since Q1 2021 (Q3: +5.6% yoy), despite lower inflation in the quarter. Government spending, meanwhile, contracted at a more moderate pace of 1.9% in Q4 (Q3: -2.8% yoy). Fixed investment growth accelerated to 14.8% in Q4 from the 8.3% increase recorded in the prior quarter. The notable improvement in investment was partly driven by EU recovery funds.

Exports of goods and services fell 3.5% on an annual basis in the final quarter, largely unchanged from the third quarter’s 3.6% contraction. In addition, imports of goods and services growth sped up to 7.5% in Q4 (Q3: +5.3% yoy).

On a seasonally adjusted quarter-on-quarter basis, economic growth accelerated to 1.4% in Q4 from the previous period’s 0.4% increase. Q4’s reading marked the fastest expansion since Q1.

Shifting to the current year, growth is seen slowing down following two years of above-average expansions. Domestic activity will suffer from higher interest rates and persistent price pressures. Moreover, a global economic slowdown is set to hamper the all-important tourism sector and exports. That said, EU funds should continue supporting activity. A key factor to watch is the upcoming parliamentary elections in spring. A change in government could lead to more expansionary fiscal policies, which would strain public finances.

Analysts at Fitch Solutions commented on risks to the outlook:

“Risks to the Greek economic outlook are tilted towards the downside. Uncertainty surrounding the health of consumption has remained elevated given the lack of income data, which clouds the outlook for real incomes, a key point of concern across the eurozone as elsewhere wage increases have failed to match the pace of inflation.”