Greece Macro Flash: GDP Q2:2019

​GDP growth accelerated to 1.9% y-o-y, driven by exports and public consumption

Greece's GDP growth accelerated to 1.9% y-o-y in Q2:2019 from a downwardly revised 1.1% y-o-y in Q1:2019.

Total exports increased by 5.4% y-o-y, adding 1.8 pps to GDP growth in Q2:2019, with exports of services (tourism and shipping) having the greatest impact (+1.0 pps). Net exports added 0.5 pps to GDP growth in Q2:2019, as total imports increased by 3.7% y-o-y in the same period.

The increase in public consumption by 5.3% y-o-y largely reflects the reimbursement in May 2019 of the "13th pension" – which was abolished in 2012 – along with a normalization in government expenditure in the run-up to the elections in May and July 2019.

A new increase in inventory stockpiling contributed 0.9 pps to GDP growth, reflecting improving business expectations for demand and production trends for the rest of the year, which resulted in higher spending on imported primary and semi-processed goods used in production.

Gross fixed capital formation decreased by 5.8% y-o-y, in Q2:2019, although investment spending on machinery and transport equipment remained on an upward trend (increasing by 3.0% and 73.6% y-o-y, respectively, in Q2:2019, with the latter including purchases of merchant ships), reflecting higher spending by the more competitive firms.

The unexpected contraction in private consumption by 0.7% y-o-y can be mainly attributed to a deferral of important spending decisions during the pre-election period, which is expected to be reversed in Q3:2019 in view of the outstanding improvement in consumer confidence.

The available data for economic sentiment, key business sectors, as well as consumer confidence during July-August, in conjunction with the positive impact from the phasing-in of fiscal expansion measures, point to an acceleration in GDP growth to above 2.5% y-o-y in H2:2019 and to c. 2.1% y-o-y in FY:2019.