Industrial output in Greece declined a total of 30.3 percent from 2008 to 2013, with more than 50,000 jobs lost in manufacturing over the same period, according to a survey jointly conducted by the Panhellenic Exporters Association and the Athens Chamber of Commerce and Industry.
The easy conclusion might be that this contraction is due to the economic crisis and the reduction in domestic consumption. But that is only part of the truth, as the figures are the result of a long process that saw a major increase in unit labor costs without a proportionate increase in productivity. The opportunity for growth in Greek manufacturing was missed and the sector is now seeking a way out of the crisis, mainly through exports.
The survey found that the average annual growth rate of the industrial output index from 1995 to 2007 – i.e. before the crisis broke out – was just 0.6 percent, while from 2008 up to 2013 the average annual rate of decline reached 6.3 percent. The average cost of labor rose 117 percent from 1995 to 2010, while productivity expanded by just 9 percent. This translates into a major loss of competitiveness for Greek industrial products. The two indices converged in 2010-13 when the cost of labor fell 10 percent.
Even in the period when the economy was in good shape, investments in the sector were few and far between: While the period from 1995 to 2000 saw high growth rates in investment across almost all industrial sectors, the following five years posted a decline, with a minor recovery in 2006 and 2007. Then, from the 3 billion euros invested in 2008, industrial investments shrank to just 1.43 billion euros in 2011 and to 1 billion in 2012, before a slight recovery to 1.2 billion euros in 2013.
Since 2014, manufacturing has shown signs of recovery as it increasingly turns to exports: In the period from 2009 to 2016 exports have accumulated gains of 44.4 percent.