Greek Macro View - March 2014

NBG's forward-looking activity indicator predicts Greece's return to growth in Q2:2014 

An across-the-board improvement in coincident and forward-looking indicators -- for the first time since 2007 -- is evident since H2:2013. Indeed, almost 75% of activity indicators are stabilizing or in slightly expansionary territory. NBG research constructs forward-looking indicators of economic activity so as to estimate the timing and strength of its turning point. According to the empirical results, in the baseline scenario the stabilization point for real GDP, on a quarterly s.a. basis, is expected to occur in Q2:2014, while the first positive y-o-y change in GDP is estimated in Q3:2014, and is consistent with an annual GDP growth of +0.7% y-o-y in FY:2014. Business survey data suggest that the recovery will be driven by corporate activity and the concomitant revival of business investment, which is consistent with the improved profitability and ongoing restructuring of large and medium-sized corporates. The reduction in consumer spending will continue, but at a significantly slower pace, as the pace of labour market adjustment slows and the fiscal drag is lower in 2014. Moreover, the support to activity from the export sector should be stronger in 2014, as the favourable momentum in tourism activity will be reinforced by the recovery of the euro area.