GDP Q1:2023

Economic activity slowed but remained on a solid upward trend in Q1:2023:
Greek GDP increased by 2.1% y-o-y and exceeded by a significant margin –
for an 8th consecutive quarter – the respective Euro area average (+1.0%
y-o-y in Q1:2023).
▪ The deceleration in GDP growth from 4.8% y-o-y in Q4:2022 mainly reflects:
i. the unwinding of very favorable base effects that bolstered activity in
2022, after the full lifting of Covid-related restrictions,
ii. a 1.2-pp drag from a normalization in inventory levels, following the
uncertainty-driven spike in H2:2022. This factor should be considered
once-off, and unlikely to continue during the remainder of the year, and
iii. tighter monetary and fiscal policies.
▪ Private consumption increased by a solid 2.9% y-o-y (+1.4% q-o-q, s.a.), on
the back of supportive labor market conditions and declining energy prices.
Specifically, the real compensation of employees increased by 1.3% y-o-y in
Q1:2023, following a drop of 1.8% y-o-y in FY:2022, reflecting an estimated
pick-up in nominal wages (by nearly 5%) while annual employment growth
was 1.4%.
▪ Non-wage income of households, as well as corporate profits, were also
buoyant as the economy-wide gross operating surplus and mixed income
increased by 9.3% y-o-y in Q1:2023.
▪ Reflecting strong confidence levels and attractive returns, gross fixed
capital formation (GFCF) increased by 8.2% y-o-y in Q1:2023, to 14.5% of
GDP (annualized basis), on the back of rising construction activity (+19.6%
y-o-y), led by residential investment (up by +48.4% y-o-y).
▪ Net exports surprised positively with a contribution of +0.9 pps to annual
GDP growth in Q1:2023 – marking a sharp reversal from the 2.8-pp drag in
FY:2022 growth – led by a strong performance by both goods (+10.6%
y-o-y) and services exports (+6.2%). Indeed, tourist arrivals are up 75%
y-o-y in Q1. These developments are in line with our projection for a rapid
improvement in the current account deficit this year.
▪ Boding well for the remainder of the year, survey and conjunctural
indicators are consistent with a pick-up of activity in the following quarters.
▪ NBG projects GDP growth of 2.5% y-o-y in Q2:2023, and nearly 3.0% for
FY:2023. This outcome will also reflect supportive base effects, related to
higher energy costs and weakened economic sentiment in 2022, combined
with a strong pipeline of private and RRP-financed investment projects.
▪ The main downside risks to the above estimate relate to a potential decline
in economic sentiment in the event of a weakening of euro area activity,
due to the delayed impact of the ongoing monetary policy tightening, and
a recurrence of energy market tensions, as a result of geopolitical factors.

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