The Greek economy will expand by 0.7 percent this year but it risks slipping back into the mire of the recent crisis years unless the reforms are implemented, the Foundation for Economic and Industrial Research (IOBE) warned in its quarterly report published on Wednesday.
“For Greece’s economy, the dilemma has never been clearer: From the point of stabilization, where it currently is, it can clearly see two paths before it. The first way is that of reform, which will doubtlessly move it away from the crisis, and the other is that of backtracking and compromise with the inefficient production pattern of the last few decades, which sooner or later will lead us back to a crisis,” IOBE notes in its report.
Presenting the report yesterday, IOBE researchers stressed that the greatest part of the crisis is behind us and that the central estimate for growth this year is achievable, while unemployment will decline marginally to 26.7 percent this year.
The smaller-than-expected drop in the gross domestic product over the first quarter of the year (0.9 percent instead of 2.3 percent) was attributed to a slight increase in the number of households for the first time in four years, as well as to a rise in service exports thanks to the continued growth in tourism arrivals. Household consumer demand grew by 0.7 percent in the January-March 2014 period from the same time last year, when it had shrunk by 8.7 percent. State consumption expanded by 1.2 percent.
IOBE made a significant point of the exports issue: The first quarter of the year witnessed the biggest increase recorded in exports since the start of 2011, amounting to 4.5 percent, but that was almost exclusively due to the major growth in service exports (up 13.1 percent year-on-year), as commodity exports only posted a marginal rise (0.5 percent).
The report blames this fatigue in commodity export growth on the Greek economy’s lack of competitiveness. The labor cost factor has not improved the competitiveness of products, IOBE noted, as other factors such as energy costs and liquidity problems have far greater gravity. It added that efforts to improve funding conditions to new productive investments must be accelerated, which also requires some determination in dealing with old debts that cannot be serviced.