Greece Macro Flash: GDP on a strong upward trend in Q3:2021, leading to a revision to our annual forecast for 2021 to 8.5%

09/12/2021 - Reports

Greek Economy

GDP on a strong upward trend in Q3:2021, buoyed by surging domestic demand, robust goods exports and reviving tourism, leading to a revision to our annual forecast for 2021 to 8.5%


Greece’s economic recovery remained on a solid footing in Q3:2021, with GDP increasing by 13.4% y-o-y – the strongest annual growth among the euro area countries. The solid performance was underpinned by a synchronized strengthening of all major GDP expenditure components.

Private consumption grew by a robust 8.6% y-o-y (+1.1% q-o-q, s.a.) in Q3:2021, on the back of improving sentiment, supportive labor market trends (unemployment declined to an 11-year low of 13.6% and employment grew by 4.9% y-o-y in Q3) and the release of pent-up demand.

Gross fixed capital formation maintained a strong momentum growing by 18.1% y-o-y (+3.9% q-o-q, s.a.) and exceeded by 18.8% its pre-Covid level (Q3:2019). Residential construction (up by 69.0% y-o-y) and investment on machinery and weapon systems (+20.9% y-o-y) made the largest positive contributions to GFCF growth.

The revival of tourism – increase in revenue by 156% y-o-y in Q3:2021 – contributed to a surge in services exports of 85% y-o-y, narrowing the gap from the Q3:2019 outcome to -14.7%. 

This rebound has been combined with steadily rising goods exports (9.2% y-o-y in constant prices), to a new all-time high in levels, leading to an annual increase in exports of goods and services of nearly 50% y-o-y, which added almost 14.0 pps to annual GDP growth in Q3:2021.

Net exports added 5.2 pps to annual GDP growth in Q3 – the strongest contribution since Q4:2010 – despite the 8.7-pp drag due to rising imports of goods and services (21.7% y-o-y in Q3).

The effective fiscal support remained substantial with the cyclically adjusted State Budget deficit at 0.9% of GDP in 9M:2021 compared with a cyclically adjusted surplus of 1.5% in 9M:2021. 

Liquidity conditions remained highly supportive with the combined impulse from bank credit growth and corporate debt issuance reaching €3.4 bn in 10M:2021 and €7.4 bn in 2020, increasing to €19 bn cumulatively in 2020-2021, including repayable advances.

Economic activity estimates from the NBG monthly indicator of GDP suggest that GDP growth was in high single-digit territory in October-November.  Despite the modest weakening in mobility trends since mid-November (compared to their level in the first half of Q4) and the estimated drag from accelerating inflation and deteriorating Covid-19 trends, the current trajectory of the NBG indicator points to a GDP growth rate of 7.6% y-o-y in Q4:2021 which implies a FY:2021 growth of 8.5%.