The Greek Economy
At a Glance
Official Name: Hellenic Republic
Eurozone Status: Member
GDP 2013: 185.9 billion Euro (at constant prices of previous year). GDP for 2013 reached 161 billion Euro at constant prices of 2005.
The Greek economy, having achieved high growth rates until 2008, showed signs of recession in 2009 as a result of the global financial crisis, and from 2010 onwards the recession intensified considerably due to country’s fiscal imbalances. The need for consolidation led the country to embark on a trilateral mechanism of financial support, comprised of the EU, the IMF and the ECB. The restrictive income policy and drastic limitation on public expenses during the past four years have had a negative impact on GDP growth, leading to its decrease by 4.9% in 2010, 7.1% in 2011,7% in 2012 and 3.9% in 2013 (constant prices of year 2005). For 2014, the Greek economy is expected to return to growth rates of 0.6% (Draft Budget 2014, European Commission).
The reforms and restrictive policy implementations of the last years have already begun to bear positive results. The public deficit decreased by 27.8% in 2010, by 13.2% in 2011, by 37.4% in 2012, and by 66.1% in 2013 compared with the previous year (not including the amounts allocated to the support of banks). A primary surplus of 3.4 billion Euro, according to EUROSTAT, was achieved in 2013. The improvement of the external balance of payments and the negative inflation in 2013 should also be noted. The completion of PSI (Private Sector Involvement) in 2012 reduced the public debt from 170.3% of GDP in 2011 to 157.2% of GDP in 2012 (Eurostat, 2013), contributing in this way to creating a more stable macroeconomic framework. The public debt reached 175.1% of GDP in 2013, because of the support provided by financial institutions in order to improve the liquidity of the Greek economy.
A significant improvement in the development trends of economic indicators is expected this year through the acceleration of reforms aimed at the development of a more attractive investment and business environment, including liberalisation of a number of markets, faster licensing procedures, the Investment Law, flexibility in the labour market, and a reduction in the cost of production factors due to the crisis. It is estimated that starting this year the decrease of GDP will stop and there will be a return of the Greek economy to positive growth (+0.6% in 2014 and +2.9% in 2015 according to the European Commission estimates).
|GDP (Constant prices 2005)|
|Inflation: Annual Average|
|Inflation: Percentage Change December to December|
|Labour Productivity (EU-27=100)**|
|Public Investments (%GDP)**|
|Exports (Goods – Current Prices)*|
|Imports (Goods – Current Prices)*|
** Source: Eurostat
Source: Hellenic Statistical Authority, 2014
Employment - Unemployment
Unemployment in Greece, up to 2008, was relatively low at 7.6%, approximately the Eurozone average. During 2009, unemployment rose as a result of the international crisis that also affected Greece and reached 9.5%. In 2010 unemployment showed a further increase, at 12.5%, as a result of the restrictive fiscal policy due to the debt crisis. In 2011, unemployment rose further to 17.7%, in 2012 exceeded 24% and in 2013 reached 27.3%, as a consequence of the general economic crisis and the measures applied towards fiscal consolidation. Youth unemployment, which exceeds 50%, is one of the major problems arising from the domestic economic crisis. Unemployment is expected to gradually decrease from 2014 (reaching 26% in 2014 and 24% in 2015 according to European Commission estimates).
In 2013, fixed capital formation in Greece reached 22.2 billion Euro at constant prices of the previous year, showing a decrease of 13% compared with the levels of 2012 (25.5 billion Euro). This decrease is due to the drastic reduction of public expenses and the restrictive fiscal policy resulting from the economic crisis in Greece.
Despite the domestic crisis of public debt and Greece’s inclusion in the IMF- EU - ECB support mechanism, Foreign Direct Investment (FDI) was at relatively satisfactory levels in Greece during 2012, and further increased in 2013, exhibiting stabilising trends. More specifically, total capital inflows in the country in 2012 amounted to 2,004.4 million Euro, and in 2013 amounted to 3,279.3 million Euro, showing a significant increase of 63.6%.
Despite the economic crisis the net FDI inflow in Greece also showed a significant increase of 43% between 2012 and 2013, from the levels of 1,354.3 million Euro in 2012 to 1.9 billion Euro in 2013. It should be noted that this increase, and the overall increase in FDI, is mainly due to the review of 2012 volumes in which the losses of the foreign companies in Greece were integrated as negative reinvested earnings, according to the methodology of OECD and UNCTAD. However, undoubtedly the volume of net and gross FDI inflow in 2013 was at high levels, despite the continuing economic crisis during this year.
The export of Greek goods during 2013 remained at approximately the same levels as 2012, reaching 27.5 billion Euro. Imports to Greece in 2013 amounted to 46.9 billion Euro whereas in 2012 they reached 49.3 billion Euro. The reduction in imports in 2013, with exports remaining at the levels of the previous year, has resulted in the further reduction of the trade deficit of Greece.