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Surprise! Greek economy grows

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The Greek economy grew in the second quarter, surprising pretty much everyone.

Gross domestic product in the nation grew 0.8% in the three months to June, Athens said on Thursday.

The data — still preliminary at this point — shocked analysts who widely expected GDP to shrink.

 

But it’s important to note that the data covers the period just before Greece closed its banks and restricted cash withdrawals as it struggled with a deep financial crisis. The banks and Athens stock market have since reopened, but some restrictions remain.

Greek prices were falling by over 2% a month in the period, and retail sales were growing. That could mean the surprise growth was partly powered by increased consumption, as Greeks took money out of the banks and stocked up in anticipation of the shutdown.

Greece crisis: Sleeping on the streets of Athens

Analysts warn the growth is unlikely to last. The financial crisis hit Greece’s economy hard. Manufacturing plunged to record low levels in June, as many companies struggled to pay for imports and operate normally.

“Don’t forget that the current bailout deal document still forecasts 2.3% contraction for 2015 and 1.3% next year with more painful austerity needed to help towards economic recovery,” said Mike van Dulken, head of research at Accendo Markets.

Greece and its creditors completed negotiations on the terms of a third bailout package on Tuesday. The Greek parliament will vote on the package on Thursday.

The deal, worth up to 86 billion euro ($95 billion), still needs to receive a stamp of approval by the eurozone leaders, but is expected to be finalized within days. A big chunk of that money will be used to prop up the banks.

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