GDP in Greece

Greece GDP

Economy grows at softest pace since Q1 2021 in Q1 2023

Economic growth waned in the first quarter, with GDP expanding 2.1% on an annual basis (Q4 2022: +4.8% year on year). Q1’s reading marked the softest expansion since Q1 2021.

Private consumption increased 2.9% in the first quarter, which was below the fourth quarter’s 4.1% expansion. Government spending rebounded, growing 1.4% in Q1 (Q4 2022: -1.8% yoy). Fixed investment growth fell to 8.2% in Q1, marking the worst result since Q4 2020 (Q4 2022: +14.8% yoy). Investment was dented by higher interest rates as well as a decline in the pace of inventory accumulation.

Exports of goods and services increased 8.9% on an annual basis in the first quarter, which contrasted the fourth quarter’s 1.2% contraction. The improvement was partly driven by a stronger tourism sector. Conversely, imports of goods and services growth softened to 5.6% in Q1 (Q4 2022: +6.8% yoy), which, coupled with softer growth in private consumption, points to weakening demand.

On a seasonally adjusted quarter-on-quarter basis, economic activity declined 0.1% in Q1, contrasting the previous quarter’s 1.1% growth. This suggests that underlying momentum is fading.

Looking ahead, growth is set to remain subdued, albeit above most of its Eurozone peers. Tight financing conditions are set to limit domestic activity, chiefly through weaker household spending and investment. Additionally, the global economic slowdown will hamper the external sector. That said, a resilient tourism sector is set to support the economy throughout the year. Moreover, EU funds will provide further impetus.

Analysts at Fitch Solutions commented on risks to the outlook:

“Risks to our forecasts are tilted to the upside due to the possibility for private consumption to remain firmer than expected this year given seeing greater disinflation in recent months compared to the rest of Europe. As a result, wages could move into positive territory sooner supporting a more resilient outlook for consumption, which remains the largest share of the economy at 70.0% of GDP.”