Greek economic growth continued to decelerate in the second quarter of the year, sliding to 3.5 percent from 3.6 percent in the first quarter, according to official data of the National Statistics Service (NSS) released yesterday.
Despite the resilience of economic growth in Greece when compared to its fellow eurozone members, it is increasingly being affected by the international crisis. In the same period last year, growth had reached 4.1 percent of gross domestic product (GDP).
The slowdown is attributed to the decline in investment and consumption. For the third quarter in succession, investment dropped, this time by 2.7 percent year-on-year, owing to a sharp dip in construction activity. Building accounts for 15 percent of GDP and in the first five months of the year it dropped by 13.1 percent in terms of volume, 15.2 percent in surface and 19.1 percent in terms of number of permits.
In previous years, especially after the country’s entry to the eurozone and a series of interest rate cuts, construction has served as the locomotive of the economy, rising sharply prior to the imposition of value-added tax and the rise in official property values used for tax calculation purposes.
These latter developments caused a rise in prices but did not affect demand as the cost of renting remained relatively low.The cost of building or buying a house has also increased due to price hikes of fuel and raw materials.
It is characteristic that the growth in housing loans in the first six months of 2008 came to 12.4 percent against 19.5 percent in the same period of 2007.
Consumption has also slowed, with its growth rate reaching just 2.5 percent against 4.4 percent in Q2 last year.
External trade, meanwhile, has never been the country’s economic strong point, as reflected by the constantly growing trade deficit. However, according to NSS data (which are quite different to Bank of Greece figures), at least the external sector will be less negative for GDP than last year.
Imports are down by 3.9 percent compared to the second quarter of 2007, while exports have increased by 4.6 percent on an annual basis.
(KATHIMERINI, 09/04/2008)