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Greece: 2017 Economic Outlook

Monokroussos , Platon, (2017), “Greece: 2017 Economic Outlook”, Eurobank, 1 Μαρτίου

Greece’s real GDP came in at -0.4% QoQ / +0.3% YoY in Q4-16 (quarterly national accounts, flash estimate), interrupting two consecutive quarters of positive QoQ growth (Q3: 0.9%; Q2: 0.3%). For the full-year, real output grew by 0.3%, broadly in line with our earlier forecast and compared with a -0.3% projection penciled in the 2017 budget. This translates into a positive carry-over effect into 2017, to the tune of 0.3ppts, same as a year earlier.

Growth in 2016 was mainly driven by private consumption and investments. On the other hand, net exports are estimated to have had a negative contribution as imports rose faster than exports due to strengthened domestic demand. These trends can be partly attributed to favorable base effects, linked to the sharp decline in economic activity in the initial period following the summer 2015 turbulence. Nonetheless, the view of domestic economic stabilization throughout the greater part of last year is supported by a range of higher-frequency indicators, which point to gradually improving conditions in key sectors such as retail trade and manufacturing. Reflecting the aforementioned trends, conditions in the labor market continued to improve throughout last year, with employment growth averaging around 2.3% in the first 11 months and the jobless rate hitting a 56-month low of 23% in November 2016. Also on a positive note, labor productivity growth (both in terms of output per employee and output per hour worked) switched into a positive territory in Q3-16, interrupting 5 consecutive quarters of negative growth. Despite these improvements, Greece’s unemployment rate remains exceptionally high, especially among the most vulnerable segments of the working-age population (e.g. youth unemployment 45.7% in November 2016). Furthermore, the very high level of long-term unemployment (72.6% in Q3 2016) remains a serious cause of concern for the outlook of employment and productivity growth.

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