According to estimates by Eurobank the progress and prospects of the Greek economy is expected to go into the positive region in the third quarter of the year after the estimated shrinkage by about 0, 6% in the period January-June of 2014.
In the estimates of the second quarter of this year there was a further slowing of the decline in the annual rate of change of real GDP of Greece approximately to -0.3% from -0.9% in the previous quarter.
The corresponding quarterly rate of change in cyclically adjusted terms is estimated to have reached about 0.8% against a marginal decline of -0.15% in the first quarter. These estimates are consistent with the scenario of real GDP growth of the country for the entire year, at a rate between 0.5% and 1.0%.
On the demand side, the information of national accounts for the first quarter of 2014 recorded an annual increase of 0.7% in private consumption at constant prices and strengthening of 2.2% annual rate of change in imports of goods and services.
These enhance the possibility that the aforementioned components of GDP to register for the full year, improved growth rates compared with the estimates of Troikas current macroeconomic scenario (consumption by households and non-profit institutions serving households / NPISHs: -1 8% and imports of goods and services: -1.3%, in constant prices).
In contrast, the annual growth rate of total expenditure on investments in 2014, might emerge weaker than the official forecast of (+5.9% at constant rates), mainly due to the continuing downturn in the housing market.
To some extent, the data of the first quarter for private consumption was surprisingly positive given the large drop in disposable income (by 30% or more) in the previous four years, the official forecast for a further reduction of 1.5% of average gross compensation per employee in 2014 (European Commission, updating the Greek adjustment program, April 2014), high unemployment and negative household savings.
Nevertheless, not to be ruled out that is possible that the improvement trend in private consumption recorded in the national accounts is the result of deferred expenditure in previous years (due to increased uncertainty), performed with a lag, coupled with the gradual improvement in the domestic economic climate. In addition, the aforementioned trend appears to be encouraged by preliminary signs of gradual improvement in employment conditions.
In any case, the exerted macroeconomic policy should focus on stimulating investment and export-oriented economy, climate stability through consolidation and continuation of structural interventions in product and services.
The strict application of the existing structural reforms deemed crucial for stimulating the domestic business climate, improve competitiveness and export-oriented economy and attracting foreign direct investment.
Despite progress in key areas for example,( improving the ranking of Greece by 111 positions under Criterion start-ups, according to Doing Business 2014 World Bank) and the large adjustment has already taken place in terms of relative wage costs, continues be no reflection on the stagnation of exports outside the Greek tourism services and fuel.
The further stimulate export activity in the coming years as a prerequisite for achieving sustainable economic growth and avoid further significant deterioration in the external balance, when the country is back on track of real convergence with the more developed economies of the Eurozone.
On the fiscal front, the budget implementation data for the first half militate to the prediction to achieve the agreed target for a primary surplus of 1.5% of GDP this year. In addition, the improvement has been made in recent years-more than 19 points of GDP in terms of the structural primary surplus-to be fully sustainable, as it has come, for the most part, of permanent measures, ei. reducing the number of civil servants by 160,000.
According to a recent report by Eurobank (Greece Macro Monitor 12 May 2014), taking into account the current level of the debt-GDP ratio of Greece, the introduction of new fiscal consolidation measures could lead to an immediate increase in the above ratio, if the fiscal multiplier is higher than 0.5.
Despite these developments, avoid taking fiscal measures or even a more gradual / less “front-loaded” implementation of the fiscal consolidation in the last 4-5 years would result in an explosive increase in the government debt-GDP or, at best, in stabilize the ratio at significantly higher levels than the current ones.
Finally, this report presents updated projections for medium-term developments in the government debt-GDP ratio of Greece, and the net borrowing of general government level, taking into account both the most recent estimates by the European Commission and the IMF and secondly the positive impact range potential strategies include, inter alia, the use of internal sources of liquidity.
These strategies, combined with new issues of government bonds (average annual nominal value of approximately EUR 5.5 billion) and the measures agreed in the recent evaluation of the Greek adjustment program could ensure full coverage of any financing gaps down for the next 6-7 years, making unnecessary a new funding program from the official sector.
