Euler Hermes
Economic Outlook no. 1189-1190 |Macroeconomic, Risk and Insolvency Outlook
Greece
Sixth year of contraction
Overview The Greek economy is expected to contract for the sixth consecutive year in 2013 (-3.7%) and to stabilize in 2014 (-0.1%). Despite some progress on the financial front (agreement on a second restructuring of the public debt), the Greek economy continues to face numerous headwinds. In addition to a strained political and social climate, the macroeconomic risk remains high. Between 2008 and 2012, Greek production fell 20%, resulting in a sharp adjustment in domestic demand (-25% between 2008 and 2012) and its determinants and dragging the economy into a recessive spiral, the end of which is difficult to see in light of the ongoing austerity and weak export prospects in 2013.
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Fiscal consolidation has been relaxed slightly but the recessive impact will remain strong given the economy’s limited room for maneuver. The budget reduction plan has been readjusted in agreement with the Troika: the deficit reduction timetable has been extended by two years, stretching out to 2016 with a primary deficit target of -4.5% of GDP. However, the spending cuts planned in the 2013 budget – notably in the areas of public sector wages and healthcare – threaten to undermine growth prospects, already very weak, through an even sharper deterioration in domestic demand.
Household spending will continue to decline. Household spending has con- tracted by nearly -8% in 2012 and is likely to decrease at a similar rate in 2013. Leading indicators remain down- beat (decline in wholesale and retail sales) and confidence surveys (surveys on future retail sales) point to a contin- uation of this trend. In the medium term, the sharp deterioration in the job market (+5 pp in the unemployment rate between 2011 and 2012) and the payroll cuts in the public sector leave little hope for a recovery.
The outlook for investment remains bleak. Like in its peers in Southern
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Europe, the component that has suf- fered the most from the crisis in Greece has been investment, which has nearly halved since 2008. Prospects for a recovery in 2013 are slim, as companies are faced with extremely weak domes- tic demand and flagging demand in the country’s main trading partners. Insolvencies are expected to +10% in 2013 after +30% in 2012. In the longer term, assuming financial strains grad- ually ease and the country’s interna- tional markets expand (continued diversification of export partners, recovery in demand in the eurozone), investment should pick up and gradu- ally turn around the recessive spiral.
Foreign trade will be the sole growth engine. The adjustment will continue to be carried out primarily via a sharp fall in imports, with a net decline fore- cast for 2013, before a more balanced performance between the export com- ponent (increase) and import compo- nent (slower decline compared with 2012)._MI
Insolvencies in number of cases
2,000 1,500 1,000 500 0
Note pays structurelle
Country Risk Level AAHIGH
H CRI
FFI 3
9 9 9 9 9 0 0 0 0 0 1 1319753197531
Sources: Office national de la Statistique (EYSE), Euler Hermes forecasts
Trading partners
USD billions: exports (FOB), imports (CIF) 12-months cumulative figures to end of Dec 2011
Country Total
of which, euro zone Italy
Turkey
Germany Cyprus USA
Country Total
of which, euro zone Germany Russie Italy
China Netherlands Economic forecasts
Change over the period, unless otherwise indicated: * contribution to GDP growth ** EUR bn
GREECE GDP
Consumer Spending Public Spending Investment Stocks Exports Imports
Net exports Current account
Unemployment rate Wages
Inflation General gov. balance ** ** forecasts * * **
share 2011 2012 2013 2014 100% -7.1 -6.0 -3.7 -0.1 74% -7.1 -7.7 18% -9.1 -6.1 15% -20.7 -17.8 -1% 1.2 -0.6 24% -0.3 -7.9
-8.1 -9.3 -7.4 1.2
-2.6
30% -8.1 -18.8 -17.4 -7% 2.4 -21
3.9 -8
Current account (% of GDP) Employment
-9.9 -4.3 -6.8 -8.4
1.1
4.0 -7
-3.5 -4.2
17.7 23.8 25.5 -10.2 -15.7 3.1
-19 -13
General gov. balance (% of GDP) -9.1 -6.5 Public debt (% of GDP) Nominal GDP
171 176 209 193
-5.1 0.3 -10 -5.5 186 186
Sources: IHS Global Insight, Euler Hermes forecasts
-1.4 -8.7 4.6 0.0 4.1
-3.5 1.7 -6
-3.2 0.2
25.3 -2.4 0.7 -7
-4.0 193 187
Exports Share of total 31 9 3 2 2 2 2
100% 28.6% 9.5% 7.9% 7.9% 6.1% 5.2%
Imports Share of total 60 24 6 6 6 3 3
100% 40.1% 10.6% 9.4% 9.2% 5.0% 3.1%
Sources: IHS Global Insight, IMF
636 820 880 996 955 921 886 576
510 542
563 650 810 1,077
1,400 1,540
700
480 577 586
805 1,504 1,691 1,333
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