National Bank: Provision for economic acceleration at 2.5% this year

In the 4th quarter, the reduction in agricultural production by 13.9% on a quarterly basis and 17.6% on an annual basis due to the natural disasters in Thessaly, forming a low of 15 years, and is estimated to have reduced the country’s population by more than 0.3% on an annual basis in 2023, according to its economic analysis. However, the National Bank’s analysis refers to a reversal of the trend this year, where it provides for an acceleration of 2.5%, based on export support and private consumption. The EIB report recalls that Greek GDP increased by 2% annually in 2023, according to the data announced by the Greek Statistical Authority. This performance is consistent with the National Bank’s updated estimate and significantly exceeded the Eurozone average (0.4% on an annual basis) for a 3rd consecutive year. However, the significant slowing of the annual GDP change to 1.2% per year in the 4th quarter of 2023 reflects the largest, of the initially estimated, losses in agricultural and livestock production from the devastating flooding in Thessaly in September 2023, as approached by the course of Gross Value Added (APA) of this sector. The APA from agricultural activities experienced an unprecedented decline of 13.9% on a quarterly basis and 17.6% on an annual basis in the 4th quarter of 2023, with its level being set at a low of 15. This development removed 0.55 percentage points from the annual rate of economic growth in the 4th quarter − versus an initial estimate for a negative effect of 0.3 percentage points − and is estimated to have reduced the country’s GDP by more than 0.3% on an annual basis in 2023 (calculating a small negative effect in the 3rd quarter). However, the EIB estimates that key components of GDP on the part of final expenditure, such as consumption and net exports, showed an upward trend, which can be attributed to the slight increase in GDP by 0.2% on a quarterly basis in the fourth quarter of 2023 compared with a reduction of 0.1% in the third quarter: Private consumption (at fixed prices) accelerated to 1.8% on an annual basis in the 4th quarter of 2023 (1.4% on a quarterly basis), mainly due to supporting labour market conditions Net exports had a positive and increasing contribution to GDP growth (0.8 percentage points per year in the 4th quarter and 0.5 percentage points in 2023, against a negative contribution of 1 percentage point in 2022), despite the flood blow and adverse external environment. The above positive trends were weakened by the contraction of investments, for the first time since the 2nd quarter of 2020, with the gross formation of fixed capital declining by 5.7% per year in the 4th quarter of 2023 due to temporary effects expected to be reversed in 2024. Therefore, the strengthening of basic monthly economic activity indicators presupposes an acceleration of GDP growth in the 1st quarter of 2024, to 1.8% per year (0.7% seasonally corrected, on a quarterly basis), according to the updated forecast of the National Bank’s Financial Analysis Division, and to around 2.5% for the total of 2024.