ECONOMY

Greeks’ worries about economy not borne out by growth figures

Statistics show the Greek economy has managed to grow faster than its EU partners – outperforming since 1996 – and most analysts expect this to continue for the next couple of years. Still, the impression one gets from talking to the average Greek is quite different. Confronted with this paradox, many commentators and others often reproduce the words of former Prime Minister George Papandreou who pointedly said once «numbers prosper but not the people,» questioning the credibility of statistical figures. Still, the economic reality unfolding before our eyes may be more complicated than that and Greece may experience what some other European countries experienced 15 or 20 years ago. By producing an average GDP growth rate of 3.5 percent during the 1996-2002 period, Greece has succeeded in surpassing the eurozone average of 2.4 percent in the same period. Moreover, Greece has been among the best performers in terms of GDP growth rate, ranking fourth among the 12 eurozone countries in the same time span. Ireland registered the highest average growth rate with 8.5 percent, followed by Luxembourg with 6.2 percent and Finland with 3.9 percent. Spain was slightly below Greece, posting an average growth rate of 3.4 percent according to EU Commission statistics. Moreover, Greece is widely expected to grow by an average 3.7-3.9 percent this year, mainly thanks to a strong rise in investment spending – as many projects linked to the 2004 Olympic Games come to fruition – and a healthy increase in private consumption spending aided by personal income tax cuts. This is well above the average GDP growth rate in the eurozone seen at 1.0-1.1 percent this year and well above Ireland’s forecast growth of 3.3 percent, which is the second-best in the euro area. Spain ranks third with a projected growth rate of 2.2 percent this year versus 0.2 percent in Germany, the euro block’s largest economy, and France’s 1.4 percent. Greece is forecast to do very well even in 2004, posting an average GDP growth rate of 3.8 percent, second-best only to Ireland’s 4.5 percent and much higher than the eurozone average projected at 2.1 percent. Mood darker than figures Still, the rosy picture does not surface when one talks to ordinary citizens, a number of bankers and even some businessmen. Excluding inflation, which is widely recognized as a serious problem and viewed by some as a by-product of strong economic growth, the majority complain about a number of things, such as falling sales, a significant slowdown in loan growth and increasing difficulties in finding a job, normally associated with a much weaker economy. Moreover, some small and mid-sized companies complain of liquidity problems, blaming the local authorities and even state agencies and ministries for delaying payments for work done long ago. And then the National Statistics Service wades in, releasing data that shows that retail sales jumped 10.5 percent year-on-year in January after a 6-percent rise in December. Confusing? The answer is definitely, «yes.» However, some analysts contend that there is an answer that reconciles the good growth numbers with the widespread downbeat mood. According to the same analysts, the Greek economy has entered a transition period whose main characteristic is the higher degree of concentration in many sectors. This structural transformation, which in some respects resembles Spain’s 15 to 20 years ago, is marked by the closure of many small shops and businesses and the expansion of large firms in the same sectors. The closure of small businesses creates discontent, adds to the number of unemployed and contributes further to the deterioration of the market climate. The same analysts quickly point to the supermarket and apparel and footwear categories, where retail sales grow strongly as a number of small and medium-sized enterprises (SMEs) have either closed down or been acquired by larger firms. Thus, the large companies continue to expand their market share in sales but may not be able to hire the majority of people from the SMEs seeking employment. They argue the same is taking place or will take place in other fast-growing sectors such as construction and related businesses where, in addition to the above, the mood appears not to be upbeat because executives and employees are concerned about their future in the post-2004 Olympics era. These analysts also point out that the general sentiment is also being weighed down by the protracted fall of the Athens Stock Exchange, which has hit brokerages, banks and insurance companies hard, as well as electrical appliance retail chains. It is known that brokerages have cut costs drastically to stay afloat, while banks and insurance companies have introduced voluntary retirement schemes and, in some cases, have even frozen new hiring to help offset decreased revenues from bourse-related activities. Moreover, a number of well-known retail chains selling durable consumer goods have been forced to close down some shops and even small firms they had bought at extraordinary high prices during the bourse’s hype years, compounding the problem and enhancing the impression of a weak economy. Still, the phenomenon of concentration, in which some small retail chains are either sold or closed down, is evident as well. So, is it correct to say that the strong Greek economy as depicted in the official statistics is not a mirage but a reality whose complexity we cannot grasp? Is it correct to say that the Greek economy is in a transition period marked by the drive toward bigger concentration in many sectors, much like other EU countries experienced years ago? Perhaps this is true, but nobody knows for sure. If it is correct, then Greece badly needs a few more years of strong economic growth to help contain unemployment and avoid other countries’ bitter experiences.