Growth target is slipping out of reach

Greece’s growth rate showed worrying signs of a slowdown in the first quarter of the year, as Hellenic Statistical Authority (ELSTAT) figures released on Tuesday showed that the economy grew by just 1.3 percent on a yearly basis in the January-March period. This has led analysts to estimate that growth this year will once again fail to reach 2 percent, putting the country’s fiscal targets at risk too.

This lowest growth rate of the last eight quarters strengthens the concern of the European Commission – to be reflected on Wednesday in its report on the Greek economy – that the government handouts may well make the budget miss the target for a primary surplus of 3.5 percent of gross domestic product.

Analysts worry that the growth slowdown is due to factors that do not appear to be temporary, such as a slowdown of exports that probably reflects the trend in the eurozone economies: According to the analysis of the GDP data, the increase in exports dropped to 4 percent in January-March from 9.1 percent in 2018. At the same time, imports of goods and services rose by 9.5 percent.

Final consumer expenditure shrank 0.1 percent, but this is mainly because of the 5 percent decline in the general government’s consumption – this is probably linked to the effort to attain excessive primary surpluses. Household consumption rose by 0.2 percent, continuing to move slowly.

Investments increased by about 8 percent, but this is because the comparison is to the first quarter of 2018 when investments had posted a dramatic decline of 26.4 percent.

If the Q1 trend continues, analysts agree that the growth rate will not exceed 2 percent, with some expecting it to come in much lower. The government recently forecast a 2.3 percent rate in its midterm fiscal plan, revised from 2.5 percent in the budget. The Commission last month projected a 2.2 percent growth rate.

The government put on a brave face, with the Finance Ministry saying the data “confirm that the Greek economy’s recovery continued for a ninth quarter in a row.”

New Democracy’s economy spokesman Christos Staikouras said that “the Greek economy continues to fly low as a result of the deliberate government choice to overtax households and corporations, so as to achieve excessive primary surpluses.”