The prospect for a positive economic growth above 2.0% on average (based on both our estimates and the IMF) within the time period of the next 5 years requires, among other things, the gradual development of a new growth model, with the main goal being extroversion and the production of international tradable goods and services. From this perspective Greek exports constitute a significant factor and a key pillar to restart Greek economy. This report aims to explore the key features and performance of Greek exports; to identify structural factors hindering further improvement of extroversion; and to establish Greece’s ranking in line with cornerstone international performance indicators focusing on international trade, taking into consideration that business export activity already experiences major challenges related to limited funding due to capital controls, high taxes and weak investment activity.
It is clear that although the Greek Exports-Imports balance (% GDP) has improved substantially in the last eight years (from 12.6% deficit in 2008 to 0.1% marginal surplus in 2015), correcting one of the long-term macroeconomic imbalances of the Greek economy, the improvement was mainly achieved through the strong contraction of imports. Export performance remains low, despite the reduction of labour cost in the period 2010-2015. The Greek export market trades in relatively few countries, while there is a weak presence in the major non EU import countries. Greece remains the least open among the small economies of the Eurozone, on the basis of total trade/GDP ratio. The exports are mainly concentrated in medium-low and low technology products and therefore face strong competition from low-wage countries. The low level of diversification and the limited penetration capabilities into international markets due to the small size of most of Greek companies are additional inhibitors to improving extroversion. It is worth noting that despite the unfavourable economic conditions, Greece is among the economies that have achieved significant improvement in global ranking in recent years under a number of international indicators related to commercial activities. Greece has improved its performance and has made important efforts at policy level, however, the country is still in a rather relatively low position compared to other EU countries. Further strengthening of exports over the next decade at a rate that exceeds our current estimates of cumulative increase of over 30% in the period 2016-2025, requires, apart from the Greek economy returning back to normality, developing a national strategy for exports and a series of measures with priorities in the following areas:
- investing in manpower and skills development in order to increase high tech production and diversify exports
- developing infrastructure and logistics
- upgrading technologically and enhancing access to ICT networks
- increasing R&D expenditures through tax motives to companies
- creating clusters among SMEs for a better access to international trade networks
- establishing new forms of finance-oriented start-ups
- front-loaded and targeted use of EU structural funds for companies with significant export activity
- upgrading trade and economic operators concerning the export activity with a view to improve penetration in international markets
- implementing the new legal framework for growth, improving further the institutional and regulatory framework
- fully implementing OECD’s toolkit (I, II and III) to reduce regulatory and administrative obstacles
- using products and services with strong competitive advantages in industries such as shipping, tourism and agri-food.
| Ilias Lekkos Group Chief Economist |
Artemis Leventakis Senior Economist |