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Hellenic-Dutch Association of Commerce & Industry

Hellenic-Dutch Association of Commerce & Industry

Member: Society Premium
Since: 27.02.2014

18, Nikolaou Zekakou Street & K. Karamanli, GR-151 25 Marousi, Greece
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HEDA: The recession deepens, despite support from external demand

18.07.2016 Share

Michael Massourakis, Chief Economist, Michael Mitsopoulos, Senior Advisor and Thanassis Printsipas, Associate Advisor, comment on the Greek Economy in the monthly bulletin of SEV (Hellenic Federation of Enterprises).

[Available data reflects a cautious stability, as most indicators fail to point clearly towards anyone direction]

The procrastination and the delays that have postponed the completion of the first review of the adjustment program have led to a new bout of uncertainty. In turn, this has led to the persistence of mixed trends in the market and to a renewed dip of the economy into recession. 

According to provisional data by ELSTAT, GDP weakened by -1.4% during Q1 2016, thus concluding three consecutive quarters of decline after 6 consecutive quarters of growth. This development is in line with the decline of the economic confidence indicator. The successful conclusion of the first review will lead to better recoveryprospects, as the payment of the tranche of €10.3 bn is expected to improve liquidity in the economy, given that part of it will be used topay off the arrears owed by the state to private sector agents. This improved liquidity, along with the likely strengthening of the tourism sector, is likely to partially offset the recessionary impact of the new fiscal adjustment measures in the pension system, as well as those leading to sizable increases in numerous taxes. For the time being, available data reflects a cautious stability, as most indicators fail to point clearly towards anyone direction. In spite of this, the economy appears to be performing stronger abroad, as domestic demand suffers from the impact of the increased uncertainty.

In particular:
• Industrial production in non-oil manufacturing increased for the 6th consecutive month in April 2016 (+4.2%), supporting an increase by +2.7% during the first 4 months of the year.
• Non-oil exports of goods continue to demonstrate resilience, returning a new to positive growth rates during April 2016 (+2.2% and +0.5% for the period from January to April 2016). During the same period, imports of goods except fuels increased spectacularly (+26.5% in April and +9.6% for the period from January to April).
• The expectations of households regarding unemployment, which had increased to extremely pessimistic levels during the previous months, are improving slightly during May 2016, along with the expectations that relate to savings and major purchases. These developments offset the worsening expectations regarding the economic situation, offering a respite from the continuous decline to consumer confidence (-71.9 from -73.7 during the previous month).
• Positive expectations regarding tourism are becoming entrenched, as receipts from tourism increased +8.2% during March 2016, making up for the losses observed during the two first months of the year (-5.6%), and resulting in a marginal decline (-0.1%) for the period from January till March 2016. At the same time, business expectations in tourism remain lower than last year, but improved during May 2016 (88.9 instead of 79.7 during the previous month).

The unemployment rate continued declining during March 2016 (24,1% instead of 24,2% during the previous month and 25,7% during March 2015) staying on a slowly improving path.

At the same time, however, 
• Economic confidence weakened slightly during May 2016 (89.7 instead of 90.3 during the previous month), as a result of negative expectations in the manufacturing industry, while expectations in all other sectors improved. At the same time, the purchase managers index (PMI) declined slightly (48.4from 49.7 during the previous month), staying below 50 forthe 4th consecutive month.

The PMI declined mainly as a result of weaker new orders, domestic and from international markets, while the decline in employment was marginal. 

Volume in retail sales declined for the 3rd consecutive month, but the decline moderated to -1.6% (from -6.8% in February), and when compared to February 2016 the seasonally adjusted volume increased by +3.2%. Overall, during the first quarter of 2016 the volume of sales declined in all stores, excluding food stores (+3.9%) and clothing and apparel stores (+1.9%), while the general index declined by -3.4%(-2.1% except fuel).

In view of developments as above, international organizations, like the European Commission and the OECD more recently, are still forecasting positive growth during the 2nd semester of 2016. Yet, the austerity measures that have already been agreed for the next 3 years are expected to burden severely private consumption that comprises 80% of GDP. In order for these forecasts to become reality and to firmly establish expectations that growth will be positive during the long term, it is necessary to encourage productive investment that will create new jobs and, as a consequence, generate sustainable incomes. This was also the core message of the Industrial Conference organized by SEV during May 23 and 24, kick-starting a debate regarding the design of an industrial strategy for innovation, growth and jobs.

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