The extent of the destruction the Greek economy has suffered in the last few years, also undermining the effort to restructure it, becomes clear when comparing specific data, not on a quarterly or annual basis, but over the longer term. The country remains in a vicious cycle of recession, the economy will not grow by more than 1 percent this year, and any positive signs have proved temporary or insufficient to alter the overall picture.
According to “Economic Outlook for Greece 2017-2018,” a study by PricewaterhouseCoopers (PwC), investment in the country’s economy dropped from 60 billion euros in 2010 to 20 billion last year. Investments are showing no signs of sustainable recovery as savings remain in the red and banks continue to deleverage their financial reports.
Consumption has been in constant decline, with a small recovery last year followed by a fresh drop in recent months. The average disposable income has gone down primarily due to the increased taxation and hikes in social security contributions, while the capital controls remain and banks are dependent on emergency liquidity assistance (ELA) for their financing.
PwC notes that disposable incomes are unlikely to grow significantly anytime soon. There are just a few domestic investments that could fuel a recovery and no significant funding for investments is expected from abroad.
At the same time it will be hard for fiscal performance to post a significant improvement without any deep structural reforms, including in the social security system. The banks’ lack of liquidity, the delayed repayment of the state’s dues to its suppliers and the capital controls are likely to persist.
PwC further argues that despite the delays in the second bailout review, Greece could avoid any unforeseeable tension and political events and achieve some growth, but not any greater than 1 percent, and the same challenges will remain next year too.
An exit from the vicious cycle, says PwC, will require not only a change in the Greek debt’s sustainability terms, but also a drastic acceleration of structural reforms and the boosting of competitiveness and growth.