Greece’s economy remains in recession in Q1 2016, net exports’ contribution to GDP declines

Greece’s national statistical service, Hellenic Statistical Authority (ELSTAT), released the country’s Q1 2016 GDP flash estimates recently. According to ELSTAT’s press release “Available seasonally adjusted data indicate that in the 1st quarter of 2016 the Gross Domestic Product (GDP) in volume terms decreased by 0.4% in comparison with the 4th quarter of 2015, while it decreased by 1.3% in comparison with the 1st quarter of 2015. Available non-seasonally adjusted data indicate that in the 1st quarter of 2016 the Gross Domestic Product (GDP) in volume terms decreased by 1.2% in comparison with the 1st quarter of 2015.”

The estimate for the first quarter growth shows long-lasting uncertainty because of postponement in finishing the first review of the economic adjustment program at present, said Eurobank in a research report. The report also implies the expectations of consumers for a reduction in their disposable income because of the planned revamp of the social security pension reform and the income tax code, combined with the expected rise of some indirect taxes. The estimate also shows a drop in net exports’ contribution to the GDP, added Eurobank.

The markets were not surprised by the negative economic growth rate flash estimate for the first quarter. In the past few weeks, a series of weak data relating to Q1 2016 were published that hinted at recession continuing in Greece. Recession started in the third quarter of 2015. Greece’s retail sales volume index dropped 5.5% y/y in February from a drop of 1.9% in January. Meanwhile, the industrial output index worsened 2.7% in February and 4.2% in March. In March, Greece’s consumer confidence indicator dropped to a 30 month low despite the economic sentiment rebounding in the first quarter.