Greek 2016 national accounts

ELSTAT released the second national accounts estimate for 2016Q4 today and the announcement did make a lot of noise. The main reason being the large growth revisions for the last quarter of 2016 with the volume decreasing by 1.1% compared to the last quarter of 2015, in stark contrast with the initial flash estimate of an increase equal to 0.3%. This development erased the initially estimated annual expansion of 0.3% with the current figure being slightly below zero.

Yet I think that looking into the detailed evolution of specific aspects of the Greek GDP paints a rather different and less alarming picture:

Both private consumption and net exports posted positive growth compared to 2015Q4 while general government consumption fell by €200mn in volume terms. The negative outcome for 2016Q4 is entirely attributed to investment which dropped 1.76bn. The reason for this is twofold.

First, change in stocks was a negative 1.47bn which coupled with another -1.53bn in Q3 resulted in a second half figure of roughly 3bn. Nevertheless, private consumption was 0.9% higher in 2016H2 which does not justify such a fall in stocks (almost 10% of quarterly private consumption). Taking a look at a 4-quarter moving sum reveals that the sum is close to the trough of recent stock cycles.

Given the fact that 2016Q1 change in stocks was a positive 1bn, even a zero change in stocks during 2017Q1 will lead the moving sum to a figure close to -2.7bn similar to what happened during 2012, at the depths of the Greek Depression. Obviously such dynamics are hard to reconcile with a stable/slowly increasing private consumption. A zero reading for τηε change in stocks during 2017Q1 will be equal to around 3.5% of quarterly GDP and thus have a large impact on quarter-by-quarter growth figures.

The second aspect of investment was gross fixed capital formation which came at roughly the same magnitude as previous quarters (5.45bn). Nevertheless, the corresponding 2015Q4 figure was exceptionally large (6.3bn) and resulted in a negative effect when compared to the last figure of 2016. Yet the 2015Q4 number seems to be a clear outlier, probably attributed to capital controls effects during 2015. This is quite clear if we compare the difference of fixed investment to its 4-quarter moving average since the start of 2011:

Overall, I think that 2016Q4 investment developments constitute a set of outliers and will not have a large impact of 2017 GDP movements. Although I do not share the government’s optimism about a large 2017 growth, I do not think that today’s revision for Q4 growth will change this year’s dynamics considerably.