The Greek Economy

The Greek Economy
At a Glance
Official Name: Hellenic Republic                   
Eurozone Status: Member
Currency: Euro
GDP 2012: 195.2 billion Euro (at constant prices of previous year). GDP for 2012 reached 168.5 billion Euro at constant prices of 2005.

The Economy
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 three years have had a negative impact on GDP growth, leading to its decrease by 4.9% in 2010, 7.1% in 2011, and 6.4% in 2012 (constant prices of year 2005). For 2013, it is estimated that the decrease of GDP will continue at 4.4% (Εurostat, 02/13), while for 2014 the Greek economy is expected to return to growth rates of 0.6%.

Reforms and restrictive policy implementations have already begun to bear positive results. The public deficit decreased by 30.8% in 2010, by 12% in 2011, and by 30.2% in 2012, compared with the previous year (not including the amounts allocated to the support of banks). The completion of PSI (Private Sector Involvement) in 2012 reduced the public debt from 170.3% of GDP in 2011 to 156.9% of GDP in 2012 (Eurostat, 2013), contributing in this way to creating a more stable macroeconomic framework. An improvement in the development trends of GDP is expected in 2014 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 new Investment Law, flexibility in the labour market, and a reduction in the cost of production factors due to the crisis. It is estimated that this year the decrease of GDP will end and there will be a return of the Greek economy to positive growth.   

Major Economic Indicators

 2009

 2010

2011 

 2012

GDP (Constant prices 2005)

 -3.1%

 -4.9%

 -7.1%

 -6.4%

Inflation: Annual Average

 1.2%

 4.7%

 3.3%

 1.5%

Inflation: Percentage Change December to December

 2.6%

 5.2%

 2.4%

 0.8%

Labour Productivity (EU-27=100)**

 98.2

 93.3

90.1 

 n.a.

Unemployment Rate

 9.5%

 12.5%

 17.7%

 24.2%

Public Investments (%GDP)**

 3.1%

 2.3%

1.6%

  n.a

Exports (Goods – Current Prices)*

 17.5

 21.1

 24.3

 27.6

Imports (Goods – Current Prices)*

 51.9

 50.4

 48.4

49.1 

*billion Euro     
** Source: Eurostat
Source:  Hellenic Statistical Authority, 2012

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%, and in 2012 exceeded 24%, 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.

Investment 
In 2012, fixed capital formation in Greece reached 25.5 billion Euro at constant prices of the previous year, showing a decrease of 19% compared with the levels of 2011 (31.5 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 2011, and further increased in 2012, exhibiting stabilising trends. More specifically, total capital inflows in the country in 2011 amounted to 2,781 million Euro, and in 2012 amounted to 2,942 million Euro, showing an increase of 5.8%.  

Despite the economic crisis the net FDI inflow in Greece also showed a significant increase of 179% between 2011 and 2012, from the low levels of 822 million Euro in 2011 to 2.3 billion Euro in 2012. This sharp increase is mainly due to the review of 2011 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 FDI inflow in 2012 was at relatively high levels, despite the intense economic crisis during this year. 

International trade
The export of Greek goods during 2012 showed a significant increase for the third consecutive year, reaching 27.6 billion Euro, up from 24.3 billion Euro in 2011. This increase is due to the reduction of the price of goods, intermediate goods, and production factors, as a result of the domestic economic crisis, which make Greek products more competitive, and due to the exploration of foreign markets by Greek entrepreneurs. Imports to Greece in 2012 amounted to 49.2 billion Euro whereas in 2011 they reached 48.4 billion Euro. Export growth in 2012, with imports remaining at the levels of the previous year, has resulted in the further reduction of the trade deficit of Greece.