July 20, 2024

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We are doing well inside…but it is not enough

We are doing well inside…but it is not enough

Written by Kostas Stupas

We are doing well inside…but it is not enough

When will the Greek economy “explode” is a question I’m getting more and more of late. Many of them even pass on information to me about weaknesses in individual branches that may be a harbinger of a worsening situation.

Despite individual concerns, the Greek economy will emerge in 2023 as well…

The Greek economy is performing well, as long as it achieves rates above the European Union average. Based on the latest data issued by the Commission, growth in 2023 will reach 2.4%, while in 2024 and 25 it will reach 2.3% and 2.2%, respectively.

For the euro area, the Commission expects growth of 0.6% in 2023, 1.2% in 2024, and 1.6% in 2025, compared to growth in the European Union of 0.6% in 2023, 1.3% in 2024, And 1.7% in 2025.

The good trajectory of exports, strong tourism traffic and the Group’s flows from European programs ensure the positive difference.

The above also confirms public revenues.

In the first ten months of 2023, the primary surplus rose to 6.084 billion euros, against a target of 1.746 billion euros and a primary deficit of 350 million euros for the same period in 2022.

Tax revenues amounted to 50.8 billion euros, an increase of 3.921 billion euros, or 8.4%, over the 2023 budget target.

Decisive factors in the upward trend in revenues were also the collection of VAT and the increase in sales volume due to tourism traffic in the summer.

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Growth is higher than the EU average. At the same time, primary fiscal surpluses may have been common for decades in the dynastic economies of the Protestant North, but they represented unprecedented news for the South and especially for Greece.

Exports this year show a decline after hitting a historic record of 53 billion euros in 2022.

In the eight months from January to August, the value of Greek exports fell by 5.7%, including petroleum products, to 33.77 billion euros, and rose only 2.4% excluding petroleum products.

Fluctuations in oil prices “blur” the picture. The increase in exports without oil products is also imaginary, because if we take the rise in inflation into account, the signal will be negative there as well. But we are not talking about a collapse.

The most interesting element that shows that something is changing in the Greek economy concerns the qualitative characteristics of exports.

In the second quarter of 2023, the most important Greek exports were not agricultural products or petroleum products with the usual low added value, but aluminum and pharmaceuticals. Computers and peripheral equipment are also among the top ten exports. 68% of Greek exports go to European Union countries.

So there are positive elements and encouraging signs. But it is difficult to predict how long this path will continue if international conditions worsen.

Scope Ratings’ recent assessment of the Greek economy is interesting: “Greece’s primary surpluses ensure its compliance with the reintroduction of EU fiscal rules and thus its continued eligibility for Eurosystem facilities. We do not expect Greece’s investment grade to be even jeopardized.” It is concluded that in a negative stagflation scenario.

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Despite the good trajectory, Greece continues to refrain from embarking on a dynamic growth path capable of significantly improving wages in the next ten years. Investments, as recorded by the composition of gross fixed assets, have managed to exceed 30 billion euros annually, which is also the zero point based on the depreciation of fixed equipment. Since 22, investments have exceeded consumption, but for the country to change its category, we will need investments of more than 50 billion per year for many years.

So we’re doing well inside, but maybe it’s not enough.

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