GDP growth accelerated to 2.1% in Q1:2024 on strong business activity, with forward looking indicators strengthening further in Q2: FY2024 growth is projected to be 2.4%
• Greece’s GDP growth accelerated to 2.1% y-o-y in Q1:2024 (+0.7% q-o-q, s.a.) from 1.3% in Q4:2023 (+0.3% q-o-q s.a.), regaining momentum after a subdued H2:2023, due to a temporary weakening in fixed capital investment and flood-related agricultural production losses.
• Private consumption increased at a steady pace of 2.2% y-o-y in Q1:2024 (+0.2% q-o-q, s.a.), on the back of: i) supportive labor market conditions (total nominal compensation of employees was up by 5.6% y-o-y and by 2.5% y-o-y in CPI-deflated terms in Q1:2024), ii) rising non-labor income (rents, interest, and dividends), and iii) accelerating consumer credit (4.5% y-o-y in March 2024 from 3.4% in December 2023).
• Fixed capital investment rebounded in Q1:2024 (+2.9% y-o-y and by 7.1%
q-o-q, s.a., regaining traction following a 5.5% y-o-y fall in Q4:2023) on the back of higher spending on equipment and rising non-residential construction, with forward looking indicators pointing to a further strengthening in Q2:2024, notably the issuance of building permits which surged by 61% y-o-y in 2M:2024.
• Production growth in the economy would have been even stronger without the persistent drag from the flood-affected agricultural sector (drop in GVA of 12.9% y-o-y), which subtracted 0.5 pps from Q1:2024 y-o-y GDP growth.
• Net exports had a strongly negative contribution to economic growth of 3.6 pps in Q1:2024 (+0.5 pps in FY:2023). Goods exports were down by 8.8%
y-o-y, reflecting: (i) weak euro area output growth, (ii) the response to the sharp price increases in some export categories, and (iii) agricultural output losses due to climatic factors. However, goods exports should rebound, in line with the euro economy, while services exports are on track for a new record year.
• The continuing increase in goods imports (2.5% y-o-y in constant price terms, in Q1:2024) is largely explained by higher spending on production inputs and capital goods supporting investment activity, and, to a lesser extent, by consumption-oriented imports of food, beverages and consumer durables.
• The contribution of total inventories to annual GDP growth increased to a 3-year high of 4.4 pps, for the first time since Q2:2021 when the impulse from Covid19-related base effects had peaked. This positive contribution comprises: i) a “structural” part – related to the accumulation of finished, semi-finished or intermediate goods by the business sector, and ii) a “statistical” part. The latter will likely be re-allocated to other expenditure-side components in future revisions. In the event, both inventory components indicate a strong economic momentum which is confirmed by monthly indicators for Q2:2024.
• The nowcasting model of NBG’s Economic Analysis, reflecting positive forward-looking indicators, points to a steady expansion in GDP by 0.7% in
q-o-q, s.a. terms in Q2:2024 and 1.6% y-o-y. The solid Q1:2024 growth outcome, in conjunction with model-based estimates for Q2:2024, lift the positive carryover effect on GDP growth for the rest of the year to +1.8%, boding well for a FY:2024 growth of 2.4%.