Macro roundup: Post-lockdown car crash

Greece's tourism wipeout made for painful third-quarter GDP figures

Given the tourism’s importance to the Greek economy, the third quarter was always going to be the critical one for assessing the pandemic’s economic impact this year. And the national accounts figures released today aren’t pretty.

Gross domestic product contracted 11.7 percent compared with the third quarter of last year, after plunging 14.2 percent in the second quarter, which encompassed the first lockdown. The drop was almost entirely caused by the disappearance of tourism as exports and services collapsed by 44.9 percent. All other major national account components contributed towards an expansion, except for gross fixed capital formation — or investment — which slipped 0.3 percent.

For the first two quarters of the year, Greece’s recession was unprecedentedly deep, but also more or less in line with the euro-area average. The country’s dependence on tourism was always the reason why Greece was predicted to suffer one of the worst economic contractions in the region this year. The government’s desperate attempts to salvage something from the summer came to nothing.

Over the space of the last few weeks, we’ve had updated economic forecasts from the European Commission, International Monetary Fund and Greek government. The government’s numbers are the most recently updated, and are the most pessimistic, with a 10.5 percent economic contraction this year before GDP rebounds just 4.8 percent in 2021.

The government’s outlook for this year could be a little too bleak — especially since this quarter’s release contained revisions to last year’s data that add 0.5 percent of GDP growth to this year’s figures due to a statistical technicality known as the “carry-over effect”.

Adjusting for this impact, a 10 percent GDP contraction this year would imply GDP shrinking 14.5 percent in the fourth quarter compared with the same quarter in 2019 (the big caveat here is that more revisions to the data, which are common, would affect these calculations). If that happens, it would mean the current lockdown having an even bigger impact on GDP than the one in spring.

The IMF this week reiterated its forecast that Greece’s economy will contract 9.5 percent this year, and the European Commission expects it to shrink 9 percent.

Other data

  • IHS Markit’s manufacturing PMI for Greece plummeted to 42.3 in November from 48.7 in October. A level below 50 indicates contraction.

  • Retail sales fell 3.5 percent in September compared with the same month a year earlier. The drop was mainly due a 22.1 percent decrease in sales of automotive fuel, with most other categories recording increases.

  • Literal car crashes tragically increased 9.4 percent in September compared with the same month of 2019. Not normally an economic indicator, this year we’ve been paying closer attention to it as a proxy for people’s mobility.

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Next week’s key data

  • October import and export of goods (Elstat)

  • September unemployment (Elstat)

  • November consumer price index (Elstat)

  • October industrial production (Elstat)

  • First-half commercial property indices (Bank of Greece)

  • September building activity survey (Elstat)

  • Third-quarter wage cost index (Elstat)

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