Two critical areas in the economy

by Antonis Zairis*

It is a fact that the economic climate is generally positive, which is confirmed by the continuous upgrades that the Greek economy is undergoing until the so-called investment grade upgrade towards the end of the year. Specifically, foreign direct investment (FDI) hit a 20-year record in 2022 with 7.22 billion euros (largely involving real estate, acquisitions and privatizations), the trade deficit narrowed in the January-April 2023 period by 2.42 billion euros reaching 9 billion euros comparing to 11.7 billion euros in the corresponding period of 2022. The primary surplus (configurated) at 5.5 billion euros due to an explosion in tax revenues against the target of 2.3 billion euros in the period of January-August 2023. According to the Hellenic Statistical Authority, exports amounted to 54.6 billion euros in 2022 compared to 39.9 billion euros in 2021 with fuel occupying the largest share ( 36.8%) followed by industrial goods and food. As regards the growth rate now, while in the eurozone and Germany we have 2 consecutive quarters of recession until the first quarter of 2023, the forecasts for growth in Greece for the first half of the year speak of 2.4% while in the eurozone they are around 0.8%.

However, there are two (2) critical areas in the economy that need careful attention and evaluation if we want to establish a solid basis for Greek economy’s outlook and to consolidate the confidence of foreign banks regarding the favourable development of the basic economic indicators:
First, the control of net primary expenditure’s path, which is estimated at around 100 billion euros for 2024, while on the other hand, a shift to fiscal discipline will be necessary. The painful consequences of climate change and flooding, which from now on will be a normality, overturn existing plans and require serious reform interventions and properly targeted use of Community funds directed to infrastructure projects.

Second, the current account deficit, which went from 1.5% of GDP in 2019 to 10% in 2022 due to the energy costs and the pandemic crisis. So, a strategy is needed to harness it by targeting the outward orientation of the economy through internationally tradable products and opening an urgent debate on the new productive-development model that the country needs and that certainly adapts the specific characteristics of its economy. A high deficit combined with low growth is an explosive mix for the future.

*Deputy Vice President of SELPE, Assistant Professor, Business Administration-Marketing, Neapolis University, Cyprus, Associate Professor ,Hellenic Mediterranean University, Greece & Member of the Association of American Economists (AEA) and Member of the World Economic Forum