Greece Macro Flash: Our forecast for GDP growth in FY:2022 is upwardly revised to 5.7%, despite the intensifying inflationary shock

Significant upward revision in our GDP growth forecasts for 2022 to 5.7%, as fiscal measures and private sector resilience cushioned the inflationary shock on the real economy

Greece’s GDP growth outpaced consensus estimates in Q2:2022, reaching 7.7% y-o-y (+1.2% q-o-q, s.a.) – remaining one of the highest in the euro area – following an upwardly revised 8.0% y-o-y in Q1:2022 (initial estimate of 7.0%).

Private consumption had a massive 7.7-pp contribution to Q2 GDP growth in y-o-y terms, on the back of: 

  • A strong labor market performance, reflected in employment growth of 6.4% in Q2:2022.
  • Additional fiscal measures announced in April in order to cushion the impact of the intensifying energy shock.
  • A resurgence in domestic spending on services, following the full lift of Covid-19 restrictions.
  • Higher use of liquidity reserves, with household bank deposits increasing by €1.1 bn in H1:2022 (+€4.2 bn in H1:2021).

Business profits and other earnings from unincorporated business activity accelerated to 16.6% y-o-y in Q2:2022 from 11.1% y-o-y in Q1, reaching the highest level, in absolute terms, since H1:2011.

Boding well for future growth, gross fixed capital formation rose by 8.7% y-o-y in Q2, equivalent to 13.0% of GDP from 10.5% in 2019.

Net exports contributed 0.7 pps to Q2:2022 GDP growth, as buoyant tourism-led services and goods exports (+20.8% y-o-y) added 7.1 pps to y-o-y GDP growth in this quarter, outweighing the drag from increased imports. 

During the past five years exports of goods and services represent, on average, 36% of GDP, steadily increasing their share from 24%, on average, in 2000-2016.

Despite the elevated energy risks for the remainder of the year, the strength of high frequency indicators in Q3 and increased fiscal support – including the recent announcements in TIF – suggest that FY:2022 GDP growth will reach 5.5-6.0% even under a scenario of significant drop in activity in Q4 (-1.8% q-o-q, s.a.).

Nominal GDP grew by an outstanding 16.8% y-o-y in Q2:2022 from 17.5% in Q1:2022, heading to an estimated FY:2022 output level of €207 bn, last observed in 2011.

Our updated estimate of nominal GDP growth of 13.5% in FY:2022, along with the overperformance against the Budget targets in 7M:2022, are expected to lower the public debt-to-GDP ratio to 170% by end-2022 – 36 pps below its peak in 2020.

For 2023, with energy prices expected to remain high, real GDP growth is projected to be of the order of 2.0-2.5%.


Greece Macro Flash: Our forecast for GDP growth in FY:2022 is upwardly revised to 5.7%, despite the intensifying inflationary shock