The Greek statistical agency released their flash estimate on Greek 2013Q2 GDP yesterday. The volume change (compared to the same quarter of last year) was improved to -4.6% compared to -5.6% in the first quarter. Nevertheless personally I do not think that there are so many reasons to celebrate.

What I find significant is the fact that in nominal terms GDP fell -6.9%. Ever since 2011Q4, nominal GDP growth rate moves in a tight range of -6.5% to -7.6%. The same path continued during the first half of 2013 with the total fall being -7.1%. If nominal GDP continues falling at a rate of -6.5% for the rest of the year, the 2013 nominal GDP will be €180.6bn, a figure much lower than the €184bn (and -5.3% nominal change) projected by the IMF. Since government debt is in nominal terms, this slippage will increase the debt-to-GDP ratio and require further measures by the Greek government and its creditors in order to achieve the debt reduction targets. Obviously the same applies for private sector liabilities and the course of NPLs in Greek banks.

Since the nominal rate of (non) growth is the same, what has obviously changed is the GDP deflator which is in deeply negative territory of close to -2.3%. Given the stickiness of the nominal growth rate, for real GDP to fall with a lower rate will require that deflation strengthens even more.  Although price deflation can be considered a positive development for Greek competitiveness, it is not exactly a sign of economic health and of a weaker recession.