Greece Macro Flash: GDP Q4:2017 & Macroeconomic Trends

Greece's recovery gains momentum, buoyed by increased business activity

GDP increased by 1.9% y-o-y in Q4:2017 and by 1.3% y-o-y in FY:2017, the strongest performance in 10 years, despite tighter-than-initially-expected fiscal conditions.

Gross fixed capital formation rebounded impressively in Q4:2017 (+28.9% y-o-y), contributing 3.3 pps to annual GDP growth in this quarter on the back of buoyant non-residential investment (+31.4% y-o-y, the strongest rise in 11 years), which increased its share in GDP to an 8-year high of 14.0%.

The net contribution of investment in GDP growth in Q4:2017 is still sizeable (1.7 pps), even after subtracting the impact from higher imports of capital goods (mainly transportation equipment) and other inputs related to investment. On an annual basis, investment, along with inventory accumulation, contributed 0.7 pps to FY:2017 growth (c. 50% of total output growth adjusted for their corresponding import content).

Increasing business profitability, higher levels of capacity utilization and an effective acceleration in public investment activity – mainly due to a shift of funding from 2017 – are expected to support average annual growth in total investment of 10.8% y-o-y in FY:2018.

On the other hand, consumer spending decelerated over the course of 2017, declining by 1.0% y-o-y in Q4:2017 and remained flat in FY:2017, for a second consecutive year, reflecting still significant fiscal pressure and a negative impact on disposable income from positive CPI inflation, which offset positive labor market trends.

According to NBG estimates, average GDP growth in FY:2018 is estimated in the vicinity of 2.0% y-o-y, of which 0.5 pps corresponds to a positive carry from FY:2017.​