The Mitsotakis authorities’s bubble is bursting with low wages and assist for actual property and tourism
With the arrival of 2024, thick clouds started to overshadow the prospects of the Greek economic system, as indicated by the variety of unfavorable knowledge for the primary quarter printed in latest weeks by ELSTAT. The numbers are actually so unfavorable that it can’t be dominated out that when ELSTAT makes bulletins on the expansion of the primary quarter in the beginning of June, the Greek economic system can have a unfavorable signal as a substitute of a optimistic one, in a improvement that may seal the tip of the federal government’s delusion of ND that the event of the Greek economic system is feasible with lowered incomes for the biggest a part of the nation’s inhabitants and solely by way of the rise of investments and exports.
As a result of certainly, as most individuals keep in mind, to be able to reject the opposition events’ criticism of lowering actual wages by way of excessive inflation and excessive oblique taxes, the federal government of SW had repeatedly argued within the earlier two years that underneath her personal “profitable financial governance” the Greek economic system would develop by way of elevated exports of products and companies and Restoration Fund investments, despite the fact that over the previous 50 years Greek GDP had been supported by 70 % in consumption, whereas it had set a objective for 2023 of the rise in exports of products to 70 billion euros, or 15% greater than in 2022.
Greek exports are sinking
Lastly, nonetheless, the truth got here by way of ELSTAT’s knowledge and refuted it, since in keeping with the statistical authority, Greek exports of products closed in 2023 at 50.92 billion euros in comparison with 55.76 billion euros in 2022, i.e. not solely did they not improve by 15% but in addition recorded a drop of 8.7%. And worse, the decline continued at a fair quicker tempo within the first quarter of this yr.
Particularly, in keeping with ELSTAT knowledge, exports of products between January and March 2024 amounted to 12.3 billion euros in comparison with 13.85 billion euros throughout the identical interval in 2023, making a “deep dive” of 11%. This drop is definitely not surprising, because it partly displays the financial stagnation of the Eurozone, which is our nation’s important buying and selling accomplice, whereas additionally reflecting the overall stress that exists in Europe, the Center East and North Africa because of the wars, areas during which Greek corporations export.
This accelerated decline in Greek exports, nonetheless, along with already clearly displaying how misplaced and out of time the expressed targets of the ND’s financial coverage are, is a significant downside for the nation. It is because, as identified in a research by the Middle for Planning and Financial Analysis (KEPE), the dramatic drop in Greek exports signifies that Greece is dropping the battle to flee from the underside of the rating of exports per capita amongst European nations with related and even smaller inhabitants (eg Portugal, Sweden, Czech Republic, Israel, Austria, Switzerland, Hungary). Even nations which have gone by way of an identical financial disaster to Greece, e.g. Portugal, have elevated their exports to a a lot better extent than the Greek economic system, provides KEPE, sounding a warning bell that the weak spot of Greek exports provides a transparent sign that the Greek economic system shouldn’t be ready, even immediately, to realize resilience.
The second problematic component primarily based on ELSTAT’s bulletins for the primary quarter was the import figures, within the sense that though alongside the lower in exports by 11% there was additionally a lower in imports, it was way more restricted, at solely 4%. exacerbating the unfavorable affect of exports on GDP.
The commerce deficit is growing
Particularly, in keeping with the bulletins of the statistical authority, imports through the interval January – March 2024 reached 20.30 billion euros towards 21.18 billion euros throughout the identical interval of the yr 2023, with a lower of 4.2%. Thus, the commerce deficit through the interval January – March 2024 amounted to 7.97 billion euros in comparison with 7.33 billion euros throughout the identical interval of the yr 2023, displaying a rise of 8.7%, which, excluding petroleum merchandise, will increase to 14, 5%.
The renewed improve within the commerce deficit within the first quarter of 2023 signifies that the nation’s manufacturing mannequin, whose change has been mentioned a lot, stays comparatively unchanged, provides KEPE. It is because overseas direct funding (FDI), the rise of which the federal government usually triumphs over, finally stays at too low a degree to have the ability to increase manufacturing and exports of products, provides KEPE, particularly since a major a part of it’s directed in non-productive sectors akin to the true property market or tourism companies and never within the major sector or business, which stays the nice affected person in Greece. However all which means that the Greek economic system has not modified as a lot because it ought to to have the ability to face future dangers.
The third troubling component has to do with the numbers of the economic manufacturing index, which at first look look optimistic for the primary quarter, as they point out a rise of three.4% in comparison with the corresponding interval final yr. Nevertheless, the sector-by-sector image tells a unique story, as the rise within the sectoral index comes from a 12.6% improve within the electrical energy provide index (which interprets into elevated vitality prices for households and manufacturing and pushes up costs), by 3 .2% of the mining – quarries index, by 2.6% of the water provide index (water provide prices) and solely by 1.4% of the manufacturing index.
Actually, in particular classes of internationally tradable merchandise, which feed the exports that the nation wants, such because the manufacture of clothes, industrial manufacturing recorded a big drop of 14.5%. Regardless of the rise within the index, the assist supplied by industrial manufacturing to exports and GDP within the coming quarters will likely be restricted.
Large drop in consumption
Probably the most dramatic component of the primary quarter, nonetheless, has to do with the massive drop in personal consumption, as households, underneath the stress of galloping accuracy, minimize increasingly spending.
The drop in personal consumption is inferred from ELSTAT’s drop in retail gross sales by 9.8% in February and by 8.9% in January at a quantity degree, a time period that denotes gross sales at fixed costs – that means that within the first two months of 2024 households purchased a lot much less stuff. In fact, the decline in retail gross sales at fixed costs has began a lot earlier – actually, it appeared as quickly because the vacationers left the nation – as October confirmed a drop of 5.3%, November 6.2% and solely December, with personal sector items, had a marginal improve of 0.7%.
The brand new component, nonetheless, was that in February 2024 there was for the primary time a drop in turnover by 3.8% and actually in all shops, together with meals. In brief, Greek households not solely purchased fewer issues but in addition spent much less cash.
With items exports slumping and consumption falling, it’s unsure whether or not the Greek economic system will register progress within the first quarter of 2024 and the way it will proceed for the remainder of the yr. Actually there’s tourism which is off to a very good begin in 2024, with site visitors at Eleftherios Venizelos airport 16% greater than final yr within the first quarter, however even when extra vacationers come to Greece, it’s not sure that they’ll go away more cash to extend vacationer revenues above the 20 billion euros discovered final yr, because the dearer Greece will get, the less days foreigners keep.
Shopper confidence in Greece is at its nadir
Within the first quarter of 2024, Greece was the one European nation that confirmed a lower in consumption. The occasion led funding agency Wooden & Firm to handle the “Greek paradox”, specializing in the burning challenge of punctuality plaguing Greek households and including that the blow from excessive costs to shopper spending is now undermining the nation’s financial outlook.
Specializing in ELSTAT knowledge on the decline in retail turnover in February each in fixed and present costs, Wooden highlighted, amongst others, that retail gross sales in our nation not solely fell in February however fell in all classes, even within the so-called requirements, i.e. gasoline (had a gross sales lower of 11% at present costs and 9.8% at fixed costs) and meals (a 2.6% lower in gross sales at present costs and an 8% lower at fixed costs ).
He did not get the “rebound”
These outcomes point out that Greece is lagging behind the eurozone when it comes to the restoration in shopper spending, as in different nations demand has recovered.
“However why is Greece an exception?” Wooden poses the query, including that shopper confidence stays within the doldrums in our nation and has not risen because it has in different European nations, despite the fact that the unemployment fee stays secure or falls whereas the minimal wage rises, and provides two solutions:
First, as a result of customers report little or no enchancment in perceived inflation. Which means though inflation in Greece was 3.2% year-on-year in March, surveys confirmed that households are feeling it as much as thrice greater resulting from meals inflation, which stays broadly double that of headline inflation and from the best within the eurozone.
Fastened wages
Second, as a result of wages stay stagnant – as proven by the truth that of the collective agreements signed within the final two years solely a 3rd embrace wage will increase – customers are consequently dropping buying energy.
Nevertheless, so long as accuracy persists and shopper confidence stays in tatters, the Greek economic system will lose progress potential, concludes Wooden & Firm.
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