Greece Macro Monitor (Oct 21, 2015)
Greek GDP NOWcasting
Full-year recession likely to prove milder than expected
Summary in English
Based on a number of macro data releases up to October 2oth, this note provides an estimate of Greek GDP for Q3 2015 as well as our preliminary forecast for the full-year. For this purpose, we utilize two distinct methodologies; namely the GDP Nowcasting framework we first introduced in late 2013 as well as a mixed-data sampling methodology employing MIDAS/Bridge-type models.
As a reminder, our Nowcasting model produces high frequency, real-time estimates of Greece’s gross domestic product and other macroeconomic variables by applying an econometric methodology that can properly handle data reporting lags, revisions and other important aspects characterizing the daily flow of macroeconomic information.
In a similar fashion, our MIDAS/Bridge-type models combine information from monthly-sampled variables that are released ahead of the respective (quarterly) GDP data. The models fully take into account the publication lags of the monthly variables themselves and use data appropriately aligned so that respective forecasts made ahead of the actual GDP release are as informative as possible. For the particular exercise presented herein, we emphasize that due to reporting lags, the flow of macro data pertaining to Q3 2015 will continue in the following couple of months and thus, our estimates should be considered as strictly preliminary and subject to revisions.
That is, taking into consideration the unusually high degree of uncertainty characterizing the present macroeconomic trajectory as a result of, among others, the imposition of capital controls in late June as well as the recessionary impact of the new package of fiscal austerity measures agreed in the context of a new (3rd) bailout programme in mid-August. All in all, we are now looking for a YoY real GDP growth contraction in the vicinity of 2% in Q3, 2015. Furthermore, we revise our full-year GDP growth forecast to around -1.0%. This compares with our earlier forecast of -2.0% and the -2.3% figure currently projected by the European Commission and Greece’s draft 2016 Budget.
As a note of caution, we emphasize that even our new (milder) forecast for 2015 GDP growth implies a sizeable carry-over (> 2ppts) into the coming year, raising some downside risks to the -1.3% official growth forecast for 2016.
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