The June-July 2017 period is characterized by a series of positive developments in Greek economy, according to the newly founded Athens-based Institute of Alternative Policies (ENA). In its Economic Developments Bulletin, published this month, ENA estimates that the agreement reached between Greece and the institutions at the 15/06 Eurogroup meeting, signaled a turning point: it positively influenced the economic climate by putting an end to months of uncertainty and securing the necessary liquidity for the public sector and the real economy. At present, while the results of Q2 2017 are expected, projections for growth in 2017 range from 1.6% to 2.3%.
According to ENA’s analysis, Greece’s GDP growth in the first quarter of 2017, although marginal (0,4%), indicates improved prospects for a steady economic recovery and a successful and definitive exit from the adjustment program in August 2018: the economic climate has improved since the second review was completed and the series of positive developments that followed has shown that conditions are now set for the Greek economy to return to sustainable growth. In the coming months it will become clearer whether Greece, its political system and productive forces can make use – and to what extent – of the possibilities created.
At an international level, these positive prospects have been recognized by bond credit rating businesses. First Moody’s upgraded Greece’s creditworthiness on June 23, and then on July 21, Standard and Poor’s upgraded the country’s outlook, from stable to positive. Furthermore, Greece’s first bond issue since 2014, has been a successful test run on international capital markets, with the country borrowing at the lowest interest rate since the start of the crisis, and a large number of new investors expressing interest.
At the EU level, ENA posits that Greece’s s exit from the Excessive Deficit Procedure on July 12 was another landmark event for the country. Although this decision of the European Commission was expected – since from 2016 the General Government had a surplus as a percentage of GDP – it has a high symbolic value, constituting a “vote of confidence” from the Commission’s side.
As far as the real economy is concerned, among the positive developments recorded in ENA’s Economic Development Bulletin are:
- The unemployment rate is steadily decreasing, reaching 21.7% in April 2017, significantly down from its highest rate of 27.5% in 2013.
- The primary balance of the General Government for January-June amounted to a surplus of € 1,936 million, compared with a primary surplus of € 1,632 million for the corresponding period of 2016, and a target of a primary surplus of € 431 million. This development consolidates the notion that Greece can “put its house in order” and that it will not return to past mentalities. This shift in perception has beneficial effect abroad, but also inside Greece, as the productive forces of the country are gradually mobilizing.
- As far as prices are concerned, after 45 consecutive months of deflation, the Consumer Price Index has returned to positive numbers, showing an increase of 1.02% in June 2017, compared to June 2016.
- In July 2017, both the economic climate indicator and the consumer confidence indicator were significantly strengthened, while an improvement in all sub-indices of economic climate was recorded.
- The General Index for Industrial Turnover increased by 19% in May 2017, compared to May 2016.
- The current account deficit for the first half of 2017, while remaining in negative numbers, has been reduced by € 63.9 million, compared to the corresponding period in 2016. The deficit of the balance of goods has widened, however, it is noteworthy that in the first five months of 2017, compared to the corresponding period of 2016, a significant increase of 19.2% in exports was recorded.
- In the tourism sector, the travel services balance for May 2017 showed a surplus of € 925.9 million, increased by 2.5% compared to the corresponding month of 2016 (€ 903.2 million). The January-June 2017 arrivals show an increase of 10.5%, in relation to the corresponding period of 2016, confirming estimates that tourism will grow significantly in 2017.
- In the financial sector, it is worth noting that in June 2017 the net flow of both household deposits and non-financial corporations has increased, compared to the previous month (by € 771 and € 947 million respectively).
- An increase in investments was recorded during the first quarter of 2017, however, it mainly involved orders for ship machinery and transport equipment. It has to be noted though, that for 2017, national funds of the Public Investments Programme are expected to amount to € 1 billion, which will allow financing of investment projects in areas such as infrastructure and human capital.
Overall, ENA estimates that although final outcome will of course be influenced by developments in a volatile international economic environment and the Eurozone, above all, however, it will depend on the capacity Greece’s political system, society and productive forces to “respond effectively to the challenges”, by addressing the effects of long-term austerity, making use of the available resources and remedying the inequalities that the economic crisis has widened.
Read more about the Greek Economy developments via Greek News Agenda: IMF Report sees progress; Greece returns to bond markets; FinMin Euclid Tsakalotos on what Greece gained, the Left’s proposals and the future of Europe; Eurogroup agreement an important boost for growth