Greece Q3 GDP print: more to it than what the headline figure would have you believe.

The latest GDP figures for Greece were abysmal. That much can be verified by a quick look at the headline figure without further probing. If one though doesn't satisfy himself/herself with that and decides to put in the extra effort needed in order to drill down a bit further he/she may see a more nuanced (and maybe a bit less grim) picture starting to emerge. 

Given the situation that the world currently finds itself in, Greece's 3rd quarter GDP print was structurally destined to be really bad since Q3 traditionally sees the height of the tourist season and tourism is bearing the brunt of the Covid shock. So, Q3 saw Greek GDP contract by 11,65% on a year-over-year (YoY) basis, the largest drop recorded by a EU member country (excluding Luxembourg and Slovakia, as Eurostat had not reported data for these two countries at the time I was writing this).

source: Eurostat

So Greece's Q3 GDP print sucked. That's it, case closed, one might say. But I think that, luckily, it's not as straightforward as that. A look beneath the hood is warranted so as to get the full picture.

Let's start with Household Final Consumption. It expanded by 1% YoY, with Greece being one of just 4 EU countries where Household Consumption grew YoY. It seems that employment protection programs (maybe along with the savings amassed by households during the 1st lockdown period) put in place managed to support households in the midst of a unprecedented shock that delivered a massive hit to the core of Greece's economic model. Finally, increased card usage due to the Pandemic might have played a role too by bringing part of the informal consumption out in the open.

source: Eurostat

Next in line is Final Consumption of General Government, which also grew by 4,4% YoY. This was the 6th largest increase in the EU, no mean feat given the fact that Greece currently has the highest sovereign debt load among EU member states by far. Let's just hope that this won't come back to bite us later. At the same time, without fiscal support the nature and the fierceness of the shock would make the 2010-2012 depression appear like a walk in the park. And this highlights perfectly the "damned if you do damned if you don't" nature of the Greek government's choices on that matter...

source: Eurostat

 

Next, a look at Investment. Gross Capital Formation grew by 31,5% YoY but the figure was heavily skewed by an increase in stocks as Gross Fixed Capital Formation (i.e. fixed investment) remained essentially unchanged, posting a marginal 0,3% YoY decrease. This may not seem like much but in the current environment and given that it was the 6th highest reading in the EU, it's not something to be scoffed at.  

source: Eurostat

What's more, here too, the headline number is not telling the whole story. If one drills down a bit further, he/she will find that the headline number is skewed by Investment in Transport Equipment sinking to ~47% of last year's level, while all other Fixed Investment components grew YoY. 

source: ELSTAT, own calculations

Oh and I forgot to mention that this is only the 2nd time this has happened post-2006.

source: ELSTAT, own calculations

The last GDP components that we'll be looking at are Exports. The figure for Exports of Goods was more than decent, since they increased by 3,5% YoY with Greece's performance once again ranking 6th among its EU peers. 

source: Eurostat

 Finally, it's time to take a look at the culprit, the component that inflicted all that economic pain. Exports of Services decreased by a whopping 80% YoY. Furthermore, the one fixed investment component that stood out like a sore thumb (i.e. Transport Equipment) can be traced back to the tradable services sector too since the sectors most likely responsible for the drop are Shipping and Tourism (car rental firms). 

source: Eurostat

One would be excused to be doubtful about whether one component can be enough to cause a 11+% GDP drop. Well, as you can see in the chart below, given the magnitude of the drop in that one component, sadly it's more than enough...

source: Eurostat, own calculations

It's time to wrap this up. If one wanted to sum the post up in one sentence this would probably be that Greece's economic model over-reliance to Tourism (esp. post-2008) did the country a poor service this time around. Due to the Covid shock, Tourism went from a tailwind to a hurricane-force headwind in the space of a couple of quarters. With the aid of (among other things) the fiscal stimulus deployed, services exports aside, the rest of the GDP components held up decently, posting figures better than EU and EA averages. As to what's next, well your guess is as good as mine...