The National Bank of Greece (NBG) revised upward its projected annual forecast for growth to 8.5 percent from 7.5 percent in September citing rebounding tourism, surging domestic demand and strong exports.
According to NBG’s “Greece Macro Flash” report, GDP is on a strong upward trend in the third quarter (Q3) of the year with the country’s economic recovery remaining solid and GDP increasing by 13.4 percent y-o-y recording the strongest annual growth among euro area countries.
The revision comes a week after the Hellenic Statistical Authority (ELSTAT) said strong tourism performance helped Greece’s economy rebound in Q3 despite the ongoing Covid-19 pandemic, with GDP increasing by 2.7 percent over Q2 2021 and up by 13.4 percent over Q3 2020.
Tourism played a key role in the bank’s improved outlook marking a 156 percent increase in revenue y-o-y in Q3 which also contributed to an 85 percent surge in services exports y-o-y, narrowing the gap from Q3 2019 to -14.7 percent, NBG said.
The bank’s analysts note that the improved forecast is the result of a combined improvement of all GDP components and due to an accelerated recovery of tourism in the third quarter after a six-month slowdown.
At the same time, goods exports rose steadily by 9.2 percent y-o-y in constant prices to a new all-time high in levels, leading to an annual increase in exports of goods and services of nearly 50 percent y-o-y, adding nearly 14.0 pps to annual GDP growth in the third quarter of the year.
Q3 private consumption grew by an 8.6 percent y-o-y on the back of improving sentiment. Unemployment dropped to an 11-year low of 13.6 percent and employment grew by 4.9 percent y-o-y in Q3.
Net exports added 5.2 pps to annual GDP growth in Q3 marking the strongest contribution since 2010.
Liquidity conditions remained highly supportive, the bank said. Additionally, residential construction was up by 69.0 percent y-o-y and investment on machinery and weapon systems by 20.9 percent y-o-y making the largest positive contributions to growth.
Last month, Central Bank Governor Yannis Stournaras predicted that GDP would increase by 7.2 percent or more this year and that the country’s economy could grow at a rate of 5 percent in 2022 provided it is boosted by international tourism.