Greece: GDP consolidated recovery in 2Q17 - ING

The pattern of the Greek economic recovery remains volatile as soft and hard data evidence looks conducive to an acceleration in the pace of expansion in 3Q17, according to Paolo Pizzoli, Senior Economist at ING.

Key Quotes

“Having put flash estimates on hold due to methodology issues, on Friday Elstat released its provisional estimate of 2Q17 Greece GDP, including the demand breakdown.”

“Provisional seasonally adjusted data shows that the Greek GDP expanded 0.5% QoQ in 2Q17 (from an upwards revised 0.5% in 1Q) and by 0.8% (from 0.4% in 1Q) in YoY terms.”

“The demand breakdown shows that the main drivers were government spending (+16.5% QoQ) and exports (+3.8% QoQ). Household consumption (-0.1% QoQ) and, particularly, gross fixed capital formation (-4.5% QoQ) were disappointingly weak. The latter was extremely volatile. Weak investment was well reflected in a contraction of imports (-3.7% QoQ, driven by the goods component).”

“Looking ahead, we believe that the Greek economic picture looks set to improve in 3Q. Confidence indicators have unambiguously improved in July and August, with better demand prospects matched by employment expectations. Manufacturing PMI reached a 9-year high in August. Employment resumed expanding at a healthy 2% YoY clip in May, with a positive bearing on disposable income.”

“We thus expect household consumption to rebound in 3Q, adding again to quarterly growth. Growing foreign tourist arrivals should also show up in 3Q data, contributing to support for the export component. We remain more prudent on gross fixed capital formation. To be sure, the rising capacity utilisation (at 72% in 3Q, the highest level since 2Q09) should in principle command accelerating investments, but credit availability remains scarce, and investment flows might react with a delay.”

“For the time being, concerns about the next review of the Greek programme, due to start in September, should not act as a drag on growth, thanks to the lack of short-term liquidity constraints on State coffers.”

“We are currently pencilling in an acceleration of Greek GDP growth to 1.3% QoQ in 3Q, and project a conservative 1.4% average GDP growth for the whole of 2017.”