Q: economic activity In the first quarter of 2024, Greece continued to grow faster than the rest of Europe, as real GDP grew by 2.1% year-on-year, compared to the European Union (EU-27) average of 0.5%. , according to its June Economic Developments Bulletin Alfa Bank.
In some European economies such as Germany (-0.2%), Ireland (-5.9%), Austria (-1.3%), Finland (-1.1%) and the Netherlands (-0.5%) , obvious signs of recession were observed.
the growth of GDP: In Greece, private consumption and investment strengthened on a year-on-year basis, while stocks also contributed highly positively.
Conversely, both the external sector and public consumption partially offset GDP growth as exports of goods and services fell, corresponding imports increased, while fiscal interventions to combat the energy crisis were phased out.
The significant contribution of private consumption has been reflected in certain indicators of consumer demand since the beginning of the year, such as used car sales and consumer credit.
Factors driving strong consumption investment in 2024 include employment growth, deflationary inflation, the recent cut in key interest rates by the European Central Bank and tourism figures based on positive indications.
At the same time, in the context of the recovery fund and the absorption of the resources of the public investment program, the expected costs for public investments (total 12.2 billion euros) combined with the private investments they will mobilize; economic activity is expected to strengthen during the year.
Based on the latest forecasts, Greece’s GDP is expected to grow between 2% and 2.5% this year, and between 1.9% and 2.6% in 2025.
Consumer demand indicators
The flexibility of private consumption was expressed by the overall positive course of consumer demand indicators from the beginning of the year. Specifically, in the new IX first quarter, passenger cars registered a significant year-over-year increase of 11.6%, with growth approaching 30% in April (Chart 2a).
In addition, the retail trade volume index, excluding fuel and lubricants, despite declining in January and February, rose 6% year-on-year in March.
It should be noted that this indicator decreased by 2.1% last year, after a cumulative increase of 12.6% in the two years 2021-2022.
Private consumption, which accounts for 70% of Greece’s GDP, is the component that has most contributed to the country’s output growth trajectory since 2017 (excluding 2018).
In the last seven years, this dynamic is also reflected by the increasing tendency of the participation of durable goods in the total consumption expenditure of households (Figure 2b).
Consumer demand for durable goods, such as passenger car sales, is said to be more sensitive to business cycle shocks than for non-durable goods and services.
This is because because the utility from their consumption is spread over time, during periods of declining income households are likely to stop purchasing durable goods without significantly reducing the utility they receive in the short run.
Therefore, the large increase in sales of passenger cars in the last three years (2021: 22.2%, 2022: 6.7%, 2023: 16.5%), as well as in 2024. in the first quarter probably somewhat reflects a larger compared to past – households’ optimism about their future incomes, which positively affects consumer spending.
In addition, the return of financing for consumption and remaining in positive territory, already in March 2022, increases the demand not only for durable goods, which usually have higher acquisition costs, but also for private consumption in general.
It is noted that, according to the most recent data, the annual growth of consumer loans in April was 5.4%, registering an accelerated rate of growth since the end of last summer.
Finally, the European Central Bank’s latest expected rate cut of 25 basis points is expected to work towards strengthening consumer demand, barring an unexpected event (such as an escalation of tensions in the Middle East leading to a resurgence of inflationary pressures) in the near term. will stop the further reduction of interest rates.
Analysis of Demand and Investment Components: 2024
Private consumption grew by 2.2% year-on-year, making a positive contribution to GDP growth of 1.6 percentage points (pp) (Figure 1). Conversely, public consumption contributed negatively by 0.8 hours. (-4% on an annual basis), as a result of the gradual cessation of fiscal interventions to combat the energy crisis.
Investment, i.e. gross fixed capital formation, rose 2.9% year-on-year in the first quarter of 2024, contributing 0.4 percentage points to GDP growth.
It should be noted that the growth of investments compared to the last quarter of 2023 was 7.1%. Although as a percentage of GDP, they remained much lower compared to the period before the economic crisis in the country (26% in 2007), they approached in the first quarter of the year, as well as in the two years 2022-2023, 14. %. restoring the 2011
By category, investment in the non-residential construction sector recorded the highest annual growth of 10.6%, contributing to a 2.5 bpd increase in gross fixed capital formation.
It was followed by investments in transport equipment, with an annual growth of 7.8% and 0.7 m. and other investments, which increased by 1.7% and had a minimal positive contribution to the growth of total investments (0.3% per year).
In contrast, residential investment fell for the second quarter in a row, falling 14% year-on-year in the first quarter of 2024, offsetting a 1.9% decline in total investment. (Figure 3).
This decrease, however, can be attributed to base effects, as investment in the housing sector grew at a strong pace (48.4%) in the corresponding quarter last year. Inventories (including statistical differences) increased significantly in the first quarter of the year, making the largest positive contribution to GDP growth (4.6 y/y).
Finally, net exports of goods and services made a significant negative contribution, holding back first-quarter GDP growth by 3.6 percentage points.
This was largely due to an 8.8% decline in exports of goods, which led to a 5.7% year-on-year decline in total exports of goods and services, despite a 1.5% increase in services exports.
On the contrary, a year-on-year increase of 3.1% was recorded in the import of goods and services, as the import of both goods (2.5%) and services (4.8%) increased.