The latest data on Greek national accounts indicate a steady deterioration in private consumption throughout 2017 which registered negative growth during 2017H2 and only contributed 0.1% in annual GDP growth. Overall, only investment was the main driver of the small growth in the Greek economy during 2017:

Greece GDP components increase 2015 - 2017

Since investment is usually described by an accelerator effect (with domestic and external demand driving capacity utilization upwards and increasing the need for investment in new productive capacity) the only way for Greece to achieve significant growth in the coming years will be through an increase in private consumption (which is still close to 70% of GDP).

Yet as was described in a recent Eurobank 7-days economy bulletin, private household saving registered its 6th consecutive year in negative territory. According to AMECO data household gross saving was -€9.4bn in 2017, a new negative record and significantly lower than the €7.7bn during 2016. During the 2011 – 2017 period total saving was an impressive -€33.6bn (or almost 20% of the 2017 GDP figure).

Greece household gross saving 2000 - 2017

It is quite obvious that households can maintain consumption by running down assets only temporary yet the EUprojects the same dis-saving to continue throughout 2018 and 2019 with an additional €16bn reduction in household assets.

On a cumulative basis (starting at 2000 with the introduction of the Euro) total gross (negative) saving by the end of 2019 will have reached back to 2004 levels at close to €44bn (from a peak of €93bn).

Greece - Cumulative Household Gross Saving 2000 - 2019

Given the fact that a large part of household saving is not directed towards liquid deposits but is invested in other assets such as housing, it is evident that a total negative saving flow of €50bn by 2019 will place a significant challenge on household balance sheets. This is even more difficult given the large pool of outstanding NPLs, private debts towards the state/social security funds and the difficulty of securing new loans from the Greek banking system.

Since Greece is targeting large primary surpluses for the public sector at least until 2022 (in the order of 3.5% of GDP) and taking into account its structural external deficit, sectoral balances indicate that the household negative net balance is most likely to continue. Given these balance sheet dynamics it seems quite unlikely that private consumption will register large increases in the coming years and support a strong cyclical recovery for the Greek economy.