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Macro Policies start to bear fruit

The combination of key factors that we identified at the beginning of the year, namely improved confidence and elimination of tail risks, increased outlays for capital expenditure though the Public Investment Programme, a record tourism season and increased EU funding for job creation schemes are starting to have a substantial impact on economic activity. More specifically:

  • On a y/y basis, GDP contracted by just 0.3% in Q2-2014. According to our seasonally adjusted data, GDP expanded by 0.2% on a quarterly basis.
  • The economic sentiment index has improved substantially indicating further acceleration of economic activity as outright GDP growth in H2-2014.
  • Tourism revenues are up €277.8 mn in June 2014 (up €464mn in H1-2014) pushing the Current Account Balance into positive territory.
  • Public sector spending on infrastructure projects via the PIP has increased to over 600mn per month (on a rolling basis) reaching pre – crisis levels.
  • EU funding is up by more than €1bn running up to June 2014. Part of the funding has been allocated to finance investments but a substantial part has been directed towards supporting the long term unemployed and low income households.
  • Finally, job creation schemes have had a substantial impact on the labour market, leading to a stabilisation in payroll figures and pushing unemployment down to 27.0% (June 14’, sa data) from 27.4% at end -2013.

Ilias Lekkos
Group Chief Economist


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