Wait, what?
Defying expectations, Greece’s economy grew at a surprisingly rapid pace in the second quarter, according to new numbers published today. Yes, that Greece.
Greek GDP grew by 0.8% in the second quarter, compared with the previous quarter. What’s more, growth in the first quarter was revised up from a small decline to no change. Both are welcome signs that things may not be quite as bad as feared in the debt-ridden, austerity-weary country. The tourism industry, in particular, has been resilient throughout Greece’s long-running economic troubles.
Still, Greece’s economy has only grown in five of the past 30 quarters. And few think the recent growth spurt will be sustained. The Greek government imposed harsh capital controls in July, bringing already fragile economic activity to an almost complete standstill (pdf). The country’s banking system is a mess. This will be reflected in ugly economic data for the third quarter and beyond.
The Greek parliament is expected to pass a bill agreeing to the terms of a three-year, €86-billion ($96-billion) bailout deal later today (or more likely in the wee hours of tomorrow morning, as is their wont).
Minor concessions from creditors on fiscal targets and austerity measures, with the vague promise of debt relief at some point in the future, won’t do much to ease Greece’s financial pain. The country’s economy has shrunk by 25% over the past few years, and a renewed downturn will probably push it down by another 2% this year and 1% in 2016.