The economy performed worse than expected last year, as provisional figures released on Monday by the Hellenic Statistical Authority (ELSTAT) put the expansion of the country’s gross domestic product at just 1.4 percent compared to 2016, against estimates by the government and its creditors for annual growth of 1.6 percent. This raises concerns about the future, especially ahead of the end of the bailout program in August.
Already economists are anticipating that growth this year will not exceed 2 percent, compared to a forecast for 2.5 percent in the 2018 budget. If GDP continues to fail to meet expectations then that is likely to have a negative impact on fiscal measures, vindicating the International Monetary Fund’s position in favor of accelerating the reduction of the tax exemption threshold from January 2019 instead of January 2020. Of course the excessive primary surpluses of the last couple of years are a counterargument for that.
Crucially, the eagerly anticipated recovery of the economy appears too weak to power the shift Greece needs after the total 25 percent GDP slump since 2008. The 1.4 percent rise last year is almost half of what was originally forecast in the 2017 budget (2.7 percent).
Economists are particularly concerned about the course of consumption: In the last quarter of 2017 household consumption decreased 1 percent in spite of the social benefit handout in December. For 2017 as a whole, household consumption rose just 0.1 percent.
“This is a growth rate dominated by weak household consumption, while the 9.6 percent increase in investments was mainly related to tourism and logistics,” says Michalis Masourakis, chief economist at the Hellenic Federation of Enterprises (SEV).
Nikos Vettas, director of the Foundation for Economic and Industrial Research (IOBE), notes that it has not been duly noted that the growth target for 2.7 percent has only been half-achieved. And yet this translates into the creation of fewer jobs and has a negative impact on the effort to reduce nonperforming loans.