How did Greece's GDP just grow 0.8%?

Lies, damned lies and Syriza? Nope, just deflation.

by Rachel Savage
Last Updated: 13 Aug 2015

Greece’s battered economy grew 0.8% in the second quarter of this year. That’s more than Blighty. But is it a glimmer of hope emerging over the Aegean or austerity doing funny things to the Greek statistics department?

Probably neither, if we’re honest. Here’s a few possible reasons for the surprise growth

1. Greece’s economy is still yet to recover from a bigger relative contraction than the US during the Great Depression. That means any change comes from a very low base, making even the tiniest levels of growth worth more in relative terms.

Source: Hellenic Statistics Authority

2. It’s only a ‘flash’ estimate, so could be revised – although changes aren’t usually by more than a couple of tenths of a percent.

3. There have been one-off increases in Greek GDP before, so it’s conceivable there could be a similar temporary factor behind this one.

4. This is the big one: Greece’s economy is in a severe state of deflation right now, with prices shrinking 2.2% in July compared to the previous year. That 0.8% growth was on a real basis, adjusted for the falling prices. On a nominal basis, the economy actually shrank 0.7%. Not good.

Moreover, things are only going to get worse in the short-term, as the ongoing devastating impact of three weeks of capital controls, which were mostly in July won’t show up until the third quarter. Did we mention unemployment is 25%?

Meanwhile, it’s still not clear that the Germans have given any ground on Greece’s plea, backed up by the IMF, for much-needed debt relief. With the third bailout package, which still needs to be approved by both the Greek and German parliaments, filled with yet more austerity, GDP won’t be rising very far or fast for long.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Reopening: Your duty is not to the economy, it’s to your staff

Managers are on shaky ground if they think they can decide for people what constitutes...

How COVID changes the world forever: A thought experiment

Silicon Valley ‘oracle’ Tim O’Reilly imagines how different sectors could emerge from the pandemic.

The CEO's guide to switching off

Too much hard work is counterproductive. Here four leaders share how they ease the pressure....

What Lego robots can teach us about motivating teams

People crave meaningful work, yet managers can so easily make it all seem futile.

What went wrong at Debenhams?

There are lessons in the high street store's sorry story.

How to find the right mentor or executive coach

One minute briefing: McDonald’s UK CEO Paul Pomroy.