Greek economy shrinks in Q3 on weak exports, investment

A Greek national flag flutters atop the parliament building in Athens, Greece.
A Greek national flag flutters atop the parliament building in Athens, Greece.PHOTO: REUTERS

ATHENS (REUTERS) - Greece's economy contracted at a faster pace in the third quarter than previously estimated as capital controls to shore up banks took a toll on investment, exports and consumer spending, revised statistics service data showed on Friday.

Gross domestic product declined by 0.9 per cent from July to September compared to the second quarter based on seasonally adjusted data - a steeper fall than a previously estimated 0.5 per cent contraction.

Year-on-year, the 173 billion euro economy shrank 1.1 per cent in the third quarter versus a previously estimated 0.4 per cent decline.

"The new reading showed that investment outlays were significantly squeezed by uncertainty while capital controls led to a fall in exports," said economist Nikos Magginas at National Bank.

Statistics service data showed gross capital investment fell 7.0 per cent compared to the second quarter with exports down 7.1 per cent.

Consumer spending showed relative resilience, declining by 1.0 per cent while a 16.9 per cent drop in imports helped to eased the recessionary impact.

"We maintain the view that for the year as a whole, the recession will be around 0.5 percent," Mr Magginas said.

Athens imposed capital controls at the end of June to stem a flight of cash from banks by depositors unnerved at a stalemate in discussions with international lenders and speculation Greece could be forced out of the euro zone.

Greece eventually secured its third international bailout, and its future in the currency bloc, in August.

The government expects the economy to flatline this year and contract by 0.7 per cent in 2016.

But both the EU Commission and the Organisation for Economic Co-operation and Development see a 1.4 percent contraction this year, while the European Bank for Reconstruction and Development sees the economy shrinking by 1.5 percent.

"Despite the downward revision we continue to expect full-year GDP to contract by much less than expected earlier,"said Eurobank economist Platon Monokroussos.

"Wee see a full-year reading close to -0.2 to -0.3 percent, mainly on the back of a positive contribution from net exports and relatively resilient consumer expenditure."

Greece had initially expected its economy would contract by 2.3 percent this year and by 1.3 per cent next year.