The European Commission this week noted Greece’s low productivity growth rate, at a time when there is a need for high investment. In its assessment of reforms in the context of the European semester 2020, the Commission also highlighted the country’s export profile, arguing that the continuing trade deficit illustrates chronic structural weaknesses that entail increased costs for enterprises and a shortfall in competitiveness.
In the assessment report published on Wednesday in parallel with the sixth enhanced surveillance report, Brussels said that the increase in the overall competitiveness of output factors is positive, but too low for Greece to cover the distance separating it from other eurozone countries in terms of living standards in the short term.
It added that although investment has been on the rise since 2015, albeit at a slow pace, the following factors have been hampering productivity: low corporate investment, mainly in research and development; the high regulatory load that makes entrepreneurship harder and often distorts competition; insufficiencies in public administration and justice; restricted access to financing; and skill shortages.
One third of the Greek economy’s productivity shortfall compared to the reference rate in the European Union is down to the small size of Greek enterprises. The report pointed out that the average size of companies in Greece is lower than in the EU, which reveals a relatively limited capacity to utilize economies of scale and innovation.
Greek exports remain some distance from those of the other eurozone countries regarding the outward-looking character of Greek commerce, with the report citing among the obstacles the limited use of the country’s image as a trademark, and the fragmented landscape in terms of instruments and corporations for the promotion of exports.
The Commission argued that Greece could improve its exporting performance if it focused more on sectors with growth prospects and with a comparative advantage for the country, proposing food and agriculture, energy and information and communication technology.
Besides the permanent structural problems, there are also significant delays in key practical issues. The assessment report noted the delay in the creation of the online licensing system for investments, which should have been ready by end-2019.