Given the passage of time and the current economic strengthening in the Eurozone, I wondered how the Greek economy was performing now. The answer appears to be that the patient is still on a degree of life support, but its condition is improving.
The scale of the Greek economic collapse was quite dramatic. Figures from Focus Economics provide a picture of that collapse. Greek GDP declined from 191 billion Euros in 2012 to 176 Euros in 2015. Partially reflecting that decline, Government debt increased from 160% of GDP in 2012 to 180% in 2014. Retail sales dropped and dropped. The unemployment rate peaked at 26.5% in 2014.
After these dramatic changes, the economy began to stabilise. In June, the OECD reported:
After a prolonged depression, the economy stabilised in 2016 and GDP is projected to grow by 1.1% in 2017 and 2.5% in 2018. The labour market is improving, supporting private consumption, and higher demand from abroad is boosting exports. Investment has started to recover from very low levels and should gather pace. The consumption tax increase in early 2017 and recent energy price increases will raise consumer price inflation, even though core inflation will remain moderate, as ample spare capacity persists.
In 2016, the primary budget surplus was 3.8% of GDP, exceeding expectations and the 0.5% target. Further progress in combatting tax evasion, broadening the personal income tax base and controlling pension spending are key to cementing the significant fiscal achievements of recent years, while freeing up resources for much needed social assistance programmes. Public debt has stabilised but remains very high, aggravating economic vulnerabilities and calling for additional debt relief to ensure medium to long-term fiscal sustainability.In July, Greece was able to return to the Government bond market for the first time since 2014. In August, the Greek Prime Minister presented a positive view on the economic outlook, suggesting that Greece had turned the corner. Despite these signs of improvement, there is also a stream of negative reporting in the left of centre press and especially The Guardian. As in 2015, Greece's problems rouse an intensely ideological response.
One can argue about the nature of the response to Greece's problems, my personal view is that the official responses accentuated economic decline, but looking just at the present numbers Greece does appear to have turned something of a corner. Growth in the Eurozone economy remains the key. If the Eurozone continues to expand then so will Greece.As it does, the financial crisis will continue to ease, laying the basis for future growth.
- Tuesday, June 30, 2015 The Greek crisis - a high stakes game marked by blindness, inexperience and rigidity
- Thursday, July 09, 2015 Greece and the future of the Euro
- Monday, July 13, 2015 Fissures and divides in politics - Europe and Australia: a comparison
- Tuesday, July 14, 2015, Greece and the Eurozone's Federal Moment