Greece GDP growth is accompanied by weakening trade and falling investment

Let us take the opportunity to be able to look at some better news from Greece which came from its statistics office yesterday.

The available seasonally adjusted data indicate that in the 3
rd quarter of 2018 the Gross Domestic Product (GDP) in volume terms increased by 1.0% in comparison with the 2
nd quarter of 2018, while in comparison with the 3 rd quarter of 2017, it increased by 2.2%.

So Greece has achieved the economic growth level promised for 2012 in the original “shock and awe” plan of the spring of 2010. Or to be more specific regained it as the 1.3% growth of the second quarter of 2017 saw the annual growth rate rise to 2.5% at the opening of this year before falling to 1.7%. So far in 2018 Greece has bucked the Euro trend but in a good way as quarterly economic growth has gone 0.5%,0.4% and now 1%.

If we continue with the upbeat view there was this on Monday from the Markit PMI business survey of the manufacturing sector.

Greek manufacturing firms signalled renewed growth
momentum in November, with the PMI rising to a six month high. The solid overall improvement in operating
conditions was driven by stronger expansions in output and
new orders. That said, foreign demand was not as robust,
with new export order growth easing to a 14-month low.
Manufacturers increased their staffing numbers further
in November, buoyed by stronger production growth and
domestic client demand.

So starting from a basic level there is growth and it is better than the average for the Euro area with a reading of 54 compared to 51.8. Also there is hopeful news for an especially troubled area.

In line with stronger client demand, manufacturing firms
expanded their workforce numbers at the fastest pace for
three months. Moreover, the rate of job creation was one of
the quickest since data collection began in 1999


If we move to the detail of the national accounts we see that even this level of growth comes with concerns.

Exports of goods and services increased by 2.8% in comparison with the 2nd quarter of 2018. Exports of goods increased by 1.0% while exports of services increased by 3.8%.

This looks good at this point for what was called the “internal devaluation” method where the Greek economy would become more price competitive via lower real wages. But it got swamped by this.

Imports of goods and services increased by 7.5% in comparison with the 2nd quarter of 2018. Imports of goods increased by 8.3% while imports of services increased by 2.2%.

If we look deeper we see that the picture over the past year is the same. We start with a story of increasing export growth looking good but it then gets swamped by import growth.

Exports of goods and services increased by 7.6% in comparison with the 3rd quarter of 2017. Exports of goods increased by 7.9%, and exports of services increased by 8.0%…… Imports of goods and services increased by 15.0% in comparison with the 3 rd quarter of 2017. Imports of goods increased by 15.0%, and imports of services increased by 16.0%.

This is problematic on two counts and the first one is the simple fact that a fair bit of the Greek problem was a trade issue and now I fear that for all the rhetoric the same problem is back. Perhaps that is why we are hearing calls for reform again. Are those the same reforms we have been told have been happening. Also I note a lot of places saying Greek economic growth has been driven by exports which is misleading. This is because it is the trade figures which go in and they are a drag on GDP due to higher import growth. We can say that Greece has been both a good Euro area and world member as trade growth has been strong over the past year but it has weakened itself in so doing.


An economy that is turning around and striding forwards should have investment growth yet we see this.

Gross fixed capital formation (GFCF) decreased by 14.5% in comparison with the 2nd quarter of 2018.

Ouch! Time for the annual comparison.

Gross fixed capital formation (GFCF) decreased by 23.2% in comparison with the 3rd quarter of 2017.

Whilst those numbers are recessionary as a stand-alone they would be signals of a potential depression but for the fact Greece is still stuck in the middle of the current one. For comparison Bank of England Governor Mark Carney asserted that UK investment is 16% lower than it would have otherwise have been after the EU Leave vote so Greece is much worse than even that.

There are issues here around the level of public investment and the squeeze applied to it to hit the fiscal surplus targets. If this from National Bank of Greece in September is to turn out to be correct then it had better get a move on.

A back-loading of the public investment programme, along with positive confidence effects, should provide an additional boost to GDP growth in the H2:2018,

What did grow then?

Rather oddly the other sectoral breakdown we are provided with shows another fall.

Total final consumption expenditure decreased by 0.2% in comparison with the 2nd quarter of 2018.

But the gang banger in all of this is the inventories category which grew by 1321 million Euros or if you prefer accounts for 2.4% quarterly GDP growth on its own. This is not exactly auspicious looking forwards as you can imagine unless there is about to be a surge in demand. The only caveat is that we do not get a chain-linked seasonally adjusted number.


As you can see there is plenty of food for thought in the latest GDP numbers for Greece.On the surface they look good but the detail is weaker and in some cases looks simply dreadful. That is before we get to the impact of the wider Euro area slow down. The problem with all of this is that of we look back rather than the 2.1% economic growth promised for 2012 Greece saw economic growth plunge into minus territory peaking twice at an annual rate of 10.2%. Or the previous GDP peak of 60.4 billlion Euros of the spring of 2009 has been replaced by 48 billion in the autumn of 2018.

Meanwhile after the claimed triumphs and reform and of course extra cash the banks look woeful. So of course out comes the magic wand. From the Bank of Greece.

The proposed scheme envisages the transfer
of a significant part of non-performing exposures
(NPEs) along with part of the deferred
tax credits (DTCs), which are booked on bank
balance sheets, to a Special Purpose Vehicle
(SPV). value (net of loan loss provisions). The
amount of the deferred tax asset to be transferred
will match additional loss, so that the
valuations of these loans will approach market
prices. Subsequently, legislation will be
introduced enabling to transform the transferred
deferred tax credit into an irrevocable
claim of the SPV on the Greek State with a
predetermined repayment schedule (according
to the maturity of the transaction).

More socialisation of losses?



20 thoughts on “Greece GDP growth is accompanied by weakening trade and falling investment

  1. Ah yes, our old friend austerity, it began life as a way to prevent an economy overheating but somehow transformed into the idea that making millions of people poorer would somehow bring an economy out of recession. I don’t understand why people allow it or why the idea hasn’t been buried in an unmarked grave at midnight. It. Doesn’t. Work.

    • Hi therrawbuzzin

      Definitely although there are still plenty of troubles in that regard. From Kathimerini.

      “Food accounted for 16.9 percent of household spending last year, compared with an average rate of 12.2 percent across the European Union. The Greek rate is closer to the poorest countries in the bloc, in Eastern Europe. This serves to highlight the reduction of Greek households’ disposable income that has seen them covering their basic needs at the expense of other categories. In 2008 the Greek rate had stood at 15.1 percent.”

    • The arrogance in this document is breath taking, do they have any idea the reaction they will get across the EU from ordinary people if they press ahead with this>

      The yellow jacket protests will appear to be Sunday strolls in the park in comparison

      • As time goes on, expect more and more stories like this, financial oppression, political repression, more and more state surveillance and control with ever more draconian laws attacking personal freedom and free speech. It used to be called communism, but now instead of Uncle Joe you now have the Commisars of the EU, they will pass your laws and tell you what to do and how to think(national governments will be reduced to just administration centres as time goes on), just research those who were behind the Bolsheviks in the Russian revolution, and the people who devised Cultural Marxism, same people behind the EU IMHO.

        • I prefer a “K” in Cultural Marxism = Kultural Marxism

          liberal though I am ,and have been for decades, these bozos refer to be being a right wing ( as if they knew what that actually means) ….(huh?)

          thus we have the so called “tolerant” who can tolerate anything but dissent

          sorry Shaun , I know you don’t do politics

          these guys don’t do economics !

          ( 2+2 = 5 because its more inclusive ….. 😉 )


          • Forbin,
            Would be funny if it weren’t so depressingly accurate and true, here’s my version of how things have changed academically:

            1. Teaching Math In 1960s.
            A logger sells a truckload of lumber for $100. His cost of production is 4/5 of the price.
            What is his profit?
            2. Teaching Math In 1970s.
            A logger sells a truckload of lumber for $100. His cost of production is 4/5 of the price, or $80.
            What is his profit?
            3. Teaching Math In 1980s.
            A logger sells a truckload of lumber for $100.His cost of production is $80.
            Did he make a profit? Yes or No?
            4. Teaching Math In 1990s.
            A logger sells a truckload of lumber for $100. His cost of production is $80 and his profit is $20.
            Your assignment: Underline the number 20.
            5. Teaching Math In 2018.
            A logger cuts down a beautiful forest because he is selfish and inconsiderate and cares nothing for the habitat of animals or the preservation of our woodlands. He does this so he can make a profit of $20.
            What do you think of this way of making a living?
            Topic for class participation after answering the question: How did the birds and squirrels feel as the logger cut down their homes? (There are no wrong answers, feel free to express your feelings e.g., anger, anxiety, inadequacy, helplessness etc.) Should you require debriefing at the conclusion of the exam there are counselors available to assist you adjust back into the real world.
            6. Teaching Math In 2050.
            هاتشيرو تبيع كارلواد من نهاب100 دولار. تكلفة الإنتاج هو80 دولاراً. كيف الكثيرمن المالولم؟

            If anyone thinks this is a joke, just watch The Chase in the afternoon and observe the scores of kids under 30, when you see the questions they simply cannot answer – just simple basic common knowledge – your gast will be utterly flabbered.

            A lot of the “Oldies” have already spotted this and encourage them to go for the maximum £ so they will be eliminated, so they do not have to share the jackpot with them at the end.

    • Great link. It must be wonderful to be omniscient and to spend a career at the IMF surrounded by equally brilliant people in touch with the real world…
      The wonderful thing about the whole article is the contempt for any sort of democratic legitimacy. He simply knows best so
      1. As much as possible should be done by technocrats changing the rule books
      2. Treaty change and external oversight can be minimised by this method
      3. Politicians are to be told how to use their scarce political capital to get the rest done.
      If we get a second referendum this could work as the leaver manifesto!

  2. Oh dear! The IMF policy note is relying on:-
    “… —we are not talking about Treaty change. We are talking about letting the technical experts hammer out mutually acceptable compromises.”
    Ex – as in has been.
    Spurt – small drip under pressure
    Compromise – The ability to neither solve the problem, nor satisfy either side in the debate.
    I can only but dread to think who the IMF regard as “experts”, presumably themselves and anyone who has done the rounds as a Sir Humphrey Appleby in their local Palace of Hot Air?
    In the words of Corporal Frazer from Dad’s Army “We’re all doomed!”

    • Hi Colin

      The IMF still behaves as if it was the same organisation as it was pre credit crunch. But the way it was transformed by its French managing directors from an organisation for balance of payments problems to one dealing with fiscal ones meant that it is not. The policy errors and mistakes have seen to that,

  3. Hello Shaun,

    so the IMF has now no Greek debt and it’s all Germany’s , sorry ECB ?

    from what I can make out the Greeks still can’t pay their taxes and still cannot control spending

    and are still miles under in debt and possibly will default yet again , although it will not be called a default as that word is Verboten


  4. Shaun, are you aware that the Eurostat report on incorporating an OOHPI component in the HICP was released on Monday, December 3:
    Some of the witnesses to the TSC on the future of the UK in the EU really should have been asked about this report, notably Andrew Sentance, who has been favourable to the use of a net acquisitions approach to measuring OOH in the Bank of England’s target inflation indicator.
    The decision made is most unsatisfactory, basically deciding not to incorporate now based on problems of frequency and timeliness, which were hardly news to Eurostat. No indication is provided of what, if any, lapse in timeliness might be tolerated. There has always been a one-month lag in incorporating housing prices in the RPI, and no-one, not even the ONS officials who now disparage it, have seen that as a weakness. Strangely, after calculating OOHPIs ever since 2000 for countries in the EEA the Commission actually invokes alleged conceptual failings in its decision. Didn’t these exist 18 years ago?

    • Hi Andrew

      Thank you for drawing this to my attention and it is very disappointing. They have in effect led people down a blind alley. As you say this is all old news and looks to me that they have caught onto the game of house price pumping and calling it economic growth.

      • Shaun, thank you for your reply. Ten years ago, Statistics Portugal did a study for Eurostat on extracting dwelling prices from house prices, based heavily on Finnish data that ended in 2007. It concluded that the land component of house prices wasn’t large (the EU in general isn’t like London) and that dwelling prices, however modelled, didn’t move much differently from overall house prices. So when the countries in the EEA were compelled to calculate OOHPI series they had to proxy the new dwelling acquisition component using a house price index, not a dwelling price index. Now, in the penultimate paragraph, this becomes a conceptual failing because “views differ”. Land is in, then it’s out. There’s never no doubt.

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