Greece Macro Flash: GDP Q2:2020

GDP decline in Q2 of historical proportions, but better than expected, providing good basis for the remainder of the year


Greek GDP declined by 15.2% y-o-y in Q2:2020 (-14.0% q-o-q s.a.), in line with NBG estimates.

The Greek economy held up relatively better than the other Southern European countries (average decline in Q2 GDP of 18.7% y-o-y in Spain, Italy and Portugal), mainly due to the successful response to the health crisis, which stabilized confidence and allowed a gradual easing of most of the mobility restrictions in May-June, as well as the economy’s favourable starting point, following a decade-long crisis.

Private consumption decreased by 11.6% y-o-y in Q2:2020 (compared with an average decline of 14.2% in the euro area), reflecting the fact that a significant share of retail trade and service activities were closed in April-May.

Government support schemes for the labour market (amounting to €1.8 bn in Q2:2020) contained the decline in the compensation of employees to 7.3% y-o-y in Q2:2020 and the increase in unemployment to 17.0% in May. Indeed, fiscal support measures and automatic stabilizers resulted in a deterioration of the primary fiscal balance by 3.8% of 2019 GDP y-o-y in Q2:2020.

Gross fixed capital formation decreased by 10.3% y-o-y in Q2:2020 – compared to a euro area average of -15.8% y-o-y – reflecting the speeding up of public investment activity and the continuing recovery of the residential segment (+34.5% y-o-y in Q2:2020). Moreover, the starting point was relatively low, again due to the long crisis.

The external sector accounted for about 1/3 of the GDP decline in Q2:2020, with net exports subtracting 5.0 pps from GDP growth in this quarter and the drop in exports significantly outpacing the decline in imports (decreases of 32.1% y-o-y and 17.2% y-o-y, respectively, in Q2:2020).

The effective closing of the tourism sector until mid-June led to a contraction of services exports of c. 50% y-o-y (in constant prices), despite the resilient exports of shipping services. Goods exports were also relatively resilient, reflecting buoyant exports of food products.

The relatively lower decrease in imports, mostly, reflects the resilience of the demand in some segments of domestic activity.

Forward-looking and conjunctural indicators available for Q3:2020 point to a significant acceleration in activity, on a s.a. quarterly basis, to c. 5.0%, with epidemic trends and the responsiveness of the private sector to the government support representing the main catalysts, consistent with a full year decline of 7.5% y-o-y and a Q4 decline of 3.4% y-o-y.

Greece Macro Flash: GDP Q2:2020