ΔΕΝ ΓΝΩΡΙΖΑ ΤΙΣ ΑΝΥΣΙΧΙΕΣ ΣΑΣ ...??
ΑΛΛΑ ΑΠΟ ΤΩΡΑ ΚΑΙ ΣΤΟ ΕΞΗΣ ΘΑ ΕΧΕΤΕ ΚΑΤΙ ΤΕΤΟΙΟ ΣΕ ΤΑΚΤΑ ΧΡΟΝΙΚΑ ΔΙΑΣΤΗΜΑΤΑ
Chris Pavlou
Chif dealer porbank sa treasurie
at your services
Greece: No Easy Way Out
Activity: in recession since Q4 2008
After the sharp downward revision of the national
accounts data, it turned out that the economy
has been in recession since Q4 2008. Unlike
other eurozone economies, Greece remained in
recession in Q3 2009 (when GDP fell 0.3% q/q)
and we do not see an easy way out.
Private consumption is projected to continue to
contract in 2010, undermined by a fall in
employment, deceleration in wage growth, tight
credit conditions and rising inflation. As
employment continues to fall, we expect the
recovery in consumption in 2011 to be gradual
and shallow.
In spite of the expansion of public investment,
gross fixed capital formation will be restrained by
the downturn in the housing sector, tightening of
credit conditions and the poor outlook for
demand and profits.
Exports (mainly shipping and tourism receipts)
are expected to be boosted by the improvement
in world trade. Given the sharp fall in domestic
demand, the contraction in imports is likely to
continue in 2010. As a result, the contribution of
net exports to GDP growth will be positive.
Inflation: well above the eurozone average
In 2010, headline inflation will jump to 1.7% from
1.3% in 2009, thanks to higher oil prices and
new taxes on fuel, mobile phones, lotteries, cars
and luxury boats. Inflation is expected to remain
well above the eurozone average.
Due to the weakening of activity, core inflation is
forecast to decelerate for a long period, reaching
0.4% in 2011. However, we do not expect it to
turn negative, given rigidities in domestic
markets.
Policy: unsustainable fiscal position
The budget deficit has been revised up sharply
following spending overruns and tax shortfalls.
The deficit should narrow in 2010 due to the
expiration of some one-off measures.
At its current level, the deficit is unsustainable.
We have assumed fiscal consolidation will start
in 2011 by broadening the tax base, fighting tax
evasion and improving tax collection. In the long
term, measures are needed to contain pension
spending and roll back early retirement.
The main risk to the forecast is a loss in
confidence in the pace of fiscal consolidation by
the financial markets. Concern about the
growing deficit has already led to a widening of
interest spreads.
Greece: Economic Forecasts
2008 2009
(1) 2010 (1) 2011 (1) 2012 (1)
Components of Growth
Total GDP 2.0 -1.1 -0.5 0.5 1.8
Dom. Demand ex Stocks 0.3 -4.2 -1.3 0.6 1.7
Private Consumption 2.3 -2.4 -1.1 0.3 1.1
Public Consumption 0.6 1.9 1.0 0.8 1.2
Fixed Investment -7.4 -16.5 -4.8 1.8 5.2
Stocks (Cont. to Growth) 1.0 -0.5 -0.1 0.0 0.0
Exports 4.0 -11.9 1.5 2.8 4.5
Imports 0.2 -20.4 -2.7 2.6 3.3
Industrial Production -4.1 -9.5 0.0 2.3 3.5
Inflation & Labour
HICP 4.2 1.3 1.7 1.2 1.0
Core HICP 3.1 2.3 1.0 0.4 0.6
Employment 1.1 -1.3 -0.8 -0.3 0.8
Unemployment Rate (%) 7.6 9.3 9.8 10.0 10.6
External Trade
Trade Balance (EUR bn) -44.0 -38.6 -34.1 -30.1 -26.5
Current Account (EUR bn) -34.8 -31.3 -28.3 -25.6 -23.2
Current Account (% GDP) -13.8 -10.1 -9.6 -9.6 -9.2
Financial Variables
Gen. Gov. Budget (EUR bn) -19 -31 -30 -29 -28
Gen. Gov. Budget (% GDP) -7.7 -12.7 -12.0 -11.5 -11.0
Interest Rates
(2)
3-Month Rate (%) 2.89 0.70 1.10 2.25 3.50
10-Year Bond Yield (%) 5.20 5.25 5.60 5.25 5.75
Spread over Bund (bp) 226 215 210 100 100
Footnotes: (1) Forecast (2) End Period
Figures are year-on-year percentage changes unless otherwise indicated.
Source: BNP Paribas
Source: Reuters EcoWin Pro
The upward revision to official estimates of the public deficit explains
the recent widening of Greek government bond spreads vis-à-vis
German Bunds. Besides general risk aversion, Greece is being
penalised for its high level of government debt and its unfavourable
long-term fiscal outlook. As a result, the cost of financing has risen