Population 11.204 million
GDP 254.978 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
-4.9 |
-7.1 |
-6.5 |
-4.5 |
|
Inflation (yearly average) (%)
|
4.7 |
3.1 |
1 |
-0.2 |
|
Budget balance (% GDP)
|
-10.8 |
-9.5 |
-6.9 |
-5.6 |
|
Current account balance (% GDP)
|
-10.1 |
-9.9 |
-5.3 |
-4.5 |
|
Public debt (% GDP)
|
148.3 |
170.6 |
177 |
190 |
| (e) estimate (f) forecast | ||||
STRENGTHS
- Supported by the international financial community
- World’s leading ship owner
- Tourist attractiveness
WEAKNESSES
- Until the crisis, growth based on swollen public and private debt
- Weakness of public institutions, reflected especially in widespread tax evasion
- Reduced size of industry, low technological content of exports (food and chemical products)
- Business environment hampered by red tape
- Social tensions fostered by fiscal austerity and high unemployment
Risk assessment
In 2013, the country will suffer its sixth year of recession
In 2012, the economy posted a further sharp contraction due to the ongoing austerity policy, lower real household income and the drying up of the supply of bank credit. Gains in competitiveness resulting from lower wages did not materialize due to sagging foreign demand. It is essentially the sharp fall in imports that has enabled the scale of the recession to be held in check and has led to a decline in the external account deficit. With the same factors at work, domestic demand components are expected to remain in the red in 2013, though the decline will be less marked. Investment, down by 18% in 2012 (against -8% for private consumption), is expected to contract the most. The contribution of foreign trade to growth will remain positive.
Businesses and the banking sector in great difficulty
The economic fabric is very shaky. SMEs and individual businesses, which are its essential elements, are struggling to survive. Faced with a drop in orders, the pressure of increased taxation, a drying up of credit and lengthening customer payment terms, they have seen turnover fall and profit margins shrink. Many have shed workers so as not to go under. In this context, payment defaults can only increase and business closures accumulate. Nearly all sectors are affected, with building and public works, the sectors most closely linked to it and trade hardest hit. Tourism (15% of GDP) was affected by political and social instability over most of 2012 and saw its turnover shrink after a record 2011. The banking sector is itself in great difficulty, having to deal, at one and the same time, with a rise in non-performing loans, deposit withdrawals (until summer 2012) and the loss in the value of its Greek bond portfolio. Cut off from markets, the sector has become dependent on ECB funding. The main banks have embarked on a vast programme of mergers and acquisitions in order to meet capital requirements.
A country on a drip-feed with worrying political and social tensions
After the initial granting of an international rescue plan of €110 billion in May 2010 and faced with the worsening economic and financial situation, the country was forced to resort to a second bailout plan in March 2012, combining additional funding of €130 billion and the participation of private creditors in the form of a haircut on their Greek bond portfolio. Despite this debt reduction, the public debt ratio has continued to grow. In November 2012, the eurozone and the IMF agreed, despite their differences, to grant Greece a further €40 billion in debt relief through a combination of measures (among them, new repayment deadlines and reduction of interest rates on loans under the first rescue plan, and buyback by the Greek government of the debt still held by private creditors). This new plan could again prove insufficient, which raises the question of the cancellation of the debt held by official creditors (the majority of the burden). The announcements made by Germany make such an eventuality seem possible. On condition, however, that Greece manages to achieve a primary budget surplus (excluding interest) by 2014-2015 and honours all its commitments. The victory of the New Democracy party in the June 2012 legislative elections and the parliamentary support of the socialists and a moderate left-wing party have somewhat reassured investors, driving away, at the time, the spectre of a hasty exit from the eurozone. Nevertheless, this coalition could prove unstable if social unrest should increase, which could jeopardize compliance with the agreements concluded with the “troika”. As a result of swingeing pension and wage cuts, tax increases and unemployment, which now stands at over 25% of the labour force and over 60% of those between 15 and 24, the country is today facing a very deep social crisis.
