Greece: Economy grows marginally in the fourth quarter
GDP grew 0.2% on a seasonally adjusted quarter-on-quarter basis in the fourth quarter, after contracting 0.1% in the third quarter. On a year-on-year basis, economic growth slowed markedly to 1.2% in Q4, compared to the previous period’s 2.1% growth. Q4’s reading marked the worst reading since Q1 2021. In 2023 as a whole, the economy grew 2.0%, softening noticeably from 2022’s 5.7% expansion but well above the 10-year average of 0.6%.
Private consumption growth bounced back, growing 1.9% seasonally adjusted quarter-on-quarter in Q4 compared to a 0.7% expansion in Q3. A historically tight labor market should have supported household budgets in Q4. Government spending also rebounded, growing 2.4% in Q4 (Q3: -1.2% s.a. qoq). Meanwhile, fixed investment contracted 3.1% in Q4, marking the worst reading since Q4 2020 (Q3: -1.8% s.a. qoq), on the back of the ECB’s recent monetary tightening cycle.
On the external front, exports of goods and services rebounded, growing 1.3% seasonally adjusted quarter on quarter in the fourth quarter, which marked the best reading since Q1 (Q3: -0.7% s.a. qoq). Robust tourism activity aided the recovery. Conversely, imports of goods and services were steady at 2.0% in Q4, marking the strongest reading since Q4 2022.
Our panelists expect the economy to pick up some steam in Q1, and survey data so far is supportive: Both the manufacturing PMI and economic sentiment averaged higher in January–February than in Q4. In 2024 as a whole, the Consensus is for the economy to expand at a similar pace compared with last year. A resilient tourism sector will support exports, while the disbursement of EU funds will boost fixed investment. An escalation of conflicts in the Middle East and Ukraine poses a downside risk.
Paolo Pizzoli, senior economist at ING, commented on the outlook:
“The Greek economy looks set to remain an outperformer in the eurozone in 2024. While exposed to the same geopolitical risks as its peers, it will be able to leverage the EU RFF funds when the plan foresees a bigger role for investment than for reforms. The investment channel will thus be key, possibly helped over the second half of the year by the expected loosening of the European Central Bank’s rate policy.”