Economy of Greece The Phoenix Economy

Economy of Greece The Phoenix Economy

Economy of Greece

Greece, an extraordinary country rich in ancient civilization, and the founders of democracy. Greece is an open economy that relies heavily on the service sector, the industry and agricultural sectors, where Greece is a significant agricultural and fisheries producer for Europe, their tourist industry will always be the basis of the Greek economy, which leads to it being visited by an estimated 33 million people in 2018. It is about the same size as New York, located in the southeastern part of Europe, close by the beautiful Mediterranean Sea, to the east of Italy. Home to the stories of its popular mythological characters, The Greek Gods and Goddesses broadcasted, originated from this beautiful country. Greece finally became an independent nation in the 1800s, joined the European community in 1981, and became a member of the economic/monetary union at the beginning of 2001, being a nation delivering world-class hospitality, handling the pandemics health aspect successfully, but faltering in their economy constructing tourism, a halt in tourists coming in Greece, due to the imposed pandemic travel restrictions, to their ultimate economic downfall.

Overview of Greece economy
Among the 27-member European Union, the economy of Greece scores as the 15th largest and 34th largest country by nominal gross domestic product (2012) in the world. A closer look at the Greece economy reveals that the greater extent of around 85% is based on the service sector, 12 % of which relies on Industry, while the lowest percentage of contribution is from the agricultural sector which consists of only 3% of the national economic output. Out of the contributing industries, the most important economic industries in Greece are those of tourism and merchant shipping. About 20 million international tourists visit Greece every year which makes it the European Union’s 7th most visited country while 16th around the world. On the other hand, merchant shipping, since Greece has the largest merchant marine in the world as it covers 16% of the world’s total capacity.
Keeping in view the above, Greece has a vast economy which is a part of 51 of the largest economies around the globe (GDP of $209.853 billion per annum) and 53rd with the purchasing power parity (PPP) ($336.486 billion per annum). By the year 2019, Greece’s economy was categorized 16th among the European Union.

In 2019, according to IMF

GDP per capita
Nominal Value $19,570
Purchasing Power Parity (PPP) $31,572

Greece is a member of OECD (Organization of Economic Co-operation and Development) and BSEC ( Organization of the Black Sea Economic Co-operation). It is also a member of the IMF (International Monetary Fund) and WTO (World Trade organization). Greece also became a part of the European Union in 2000.

Economic background
Greece is a developed country with a high-income economy, 80% of which is based on services and 20% industrial sectors (tourism and shipping), and 4% on the agriculture sector, 2017 economic output. Greece is not only a regional investor but also a foreign investor. Within the EU, Greece is a major agricultural producer.
The average growth of the Greek economy was about 4% per the year 2003-2007. By the year 2009, the economy went into a recession which began to flourish in 2014 with the generation of 0.7% GDP growth. By the year 2017, an improvement was seen in the GDP and unemployment of Greece economy.

Present economy status
Before the COVID-19 shock, the Geek economy was expanding by an average of 2% over the 3 years. The economy has been hit badly by the pandemic like in other countries, due to containment measures, social distancing, travel restrictions there is temporary shutting of the commercial activity and production leading to the reduction in the incomes, production, exports. Not only that but also reversing the recent years of employment gains and a great loss in the tourism demand has been seen. The government is trying to cope with the health and economic crisis by supporting incomes and firms. But still, an extraordinary drop is being seen in the nominal GDP.  A recent survey has shown a severe recession in the economy up to 9.5% GDP due to the pandemic outbreak in 2020. The crisis is expected to recover by the year 2021.

Future planning/development of the economy
Once the pandemic sets back, Greece can again focus on the reform program to reinvigorate its recovery focused on enhancing investment and growth.

The government of Greece is taking measures on a reform program to achieve policy goals.
Here are those four policy objectives:
To protect the country’s economy from the COVID-19 outbreak
To attain a sustained economic recovery
To raise long-term progress
To increase inclusiveness.

By focusing on an ambitious reform package would boost the recovery, support stronger employment. Besides, raise well-being, enhance productivity and investment.

To reinvigorate the recovery, the government has set out an ambitious reform program focused on improving growth and investment. The government has taken potential measures with considerable packages to buttress income and sectors most affected by the pandemic i.e. tourism.

A package of structural reforms has been suggested to reinvigorate the recovery, increase social inclusion, and reduce the public debt.

Beyond overcoming the COVID-19 devastation, achieving country goals and stabilizing the economy requires the implementation of structural reforms to boost employment ratio, investment, and production, and to achieve sustained primary surpluses.

To address these challenges government action plan is required. According to OCED, a reform package enhance fiscal sustainability not only that but also increase productivity, employment, and investment. By 2030, GDP growth would be increased by 1 %. In addition to that achieve faster growth in income per capita with the increase of higher growth production.

However, the fiscal and economic outlook has improved but the economy still faces hazards from the following:
weak banking sector
high unemployment
large stock of public debt,
lack of international investment

Growth Rate %   Unemployment rate % Debt-to-GDP

2019 2.2 17.3 175.2
2020 2.4 15.4 169.3
2021 2 14 163.1

By 2021, to reduce the main budget the recovery reform plans have been projected and new fiscal strategies submitted for 2021-2024 due to the pandemic outlook. By 2023, Greece needs to reduce the major surplus target to a consistent level.

Up to 2022, The government should remain dedicated to the fiscal targets agreed with EU partners but the COVID-19 outbreak and its budgetary consequences warrant looking over the primary surplus target of 3.5% of GDP. To make resources available and to overcome the COVID-19 devastation there should be a plan to reduce major surplus targets, and to achieve long-standing growth and social limitations reduction in the income tax, labour, increase in public investment, and funding better-targeted social programs.

In addition to the increase in public expenditure, further improvement is needed in the tax system. Further improving the strategy and its implementation and reviewing the results will help in modifying the resources.

There is a decline of 9.5% in the economy in 2020 whereas unemployment is likely to rise to 19.9% and decline to 18.3% in 2021. The recent account deficit will reach up to 7.7% and will decline to 4.5 GDP by the year 2021.

A recession of the Greek economy of 9.5% is projected in 2020, whereas, unemployment is expected to rise to 19.9%, with an improvement in 2021, and is estimated to decline to 18.3%. The current account deficit status is about to be reached to 7.7% of GDP in 2020 and then expected to decline to 4.5% of GDP in 2021. In 2021 the economy will unwind the recession with 4.1% and the graph will be positive from 0.6 declines to 0.7% increase.

Overall, 10% of the total NPL is reduced whereas residential NPL is just slightly reduced. Further, a 38% reduction of the NPL Target was achieved between June 2017-December2019, and from early 2017 to the end of 2019, banks succeeded to reduce NPL by 34%. To finance the recovery and to restore the banks’ health the reduction in banks NPL (Non-performing Loan) is needed. A slight decrease in the NPL ratio leads to a decline in gross bank loans. Current Government plans suggest reducing the average NPL ratio (below 20%) by the end of 2021.

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