Greece has had a pathetically poor export performance for decades and in contrast with countries such as Spain and Portugal during the crisis, the exporting sectors failed to soften the austerity measures while some of the bailout troika's demands made the situation worse. The economy is the most closed in the European Union making Greece Europe's worst exporter.
The IMF said last year that recovery of Greek exports has been notably weak relative to other “peripheral” euro area economies such as Portugal or Spain. Exports from Greece have grown by only about 1/3rd the growth rates of Portugal and Spain since the trough of 2009-10. Excluding tourism and oil (which comprise about 2/3rds of total exports), the recovery of exports has been even less over the same period.
Tourism has improved since 2013 with a benefit from the turmoil in the Middle East and lower prices. However, fuel exports add little value added to the economy.
An economics paper [pdf] published by the European Commission in 2014 and authored by Uwe Böwer, Vasiliki Michou and Christoph Ungerer, says that Greece has been the most closed economy in the EU. The Greek export-to GDP ratio has been falling short of both the EU and OECD average by a wide margin for more than a decade.
In the OECD, only the United States, Japan and Australia are even more closed in terms of exports over GDP. "Greece's lack of openness stands out even more when controlling for the size of the economy.
Small economies are typically more open. While most of the smaller economies among the EU/OECD countries are indeed characterised by larger export-to-GDP ratios, Greece is clearly identified as 'small closed economy'."
Greece had an average 22.3% exports to GDP ratio in 1995-2012 compared with Ireland at 90% and Bulgaria at 58% while Denmark, Sweden and Austria were at about 50%.
Greece has had a negative trade balance of around 10% of GDP between 1995 and the late 2000s, peaking at 14.5% in 2008. Since then, the gap has been closing but the increasing export to GDP ratio masks the effect of falling GDP. Correcting for this denominator effect reveals that the narrowing of the trade balance took place mainly on the back of falling imports while exports remained largely flat.
The Economist said in November 2013 that if petroleum products are excluded, goods exports were lower than in 2008. "A survey of Greek sales managers, by Athens University of Economics and Business, found that only 26% of them saw exporting as an important strategic response to the crisis. Their priorities were seeking new domestic markets and making more use of the internet."
The European Commission economists say that in comparison to peers, Greece's export market performance has deteriorated continuously. The chart above shows the share of Greek exports of goods and services in relevant world markets approximated by the imports of 36 industrial markets weighted by Greek bilateral export weights. "Greece's declining export performance was similar to that of Italy until 2009 and has deteriorated further until a modest pick-up in 2013. While the export performance of Croatia has also been on a downward trend since 2003, other peer economies show a more favourable picture. Portugal has managed to turn around its export performance in 2005, having regained the losses of the 2000s already, while the export performance of Bulgaria, Romania as well as Turkey has improved markedly since 2000."
Italy, Spain, Greece have had trade deficits with Germany since at least 1980 - 20 years before euro launch
In Ireland the strong performance of foreign direct investment (FDI) has eclipsed the poor performance of the indigenous sector.
In contrast the FDI performance of Greece was been woeful.
Inward FDI as percentage of Greece’s GDP averaged only about 1% from 2004 through 2010, far less than that of its neighbours – an indication that Greece has not fully utilized this powerful economic lever. A more acute short-term risk with long-term implications, however, is the outflow of capital as a result of the crisis. For these reasons, attracting new capital inflows while retaining current levels of FDI must be a top priority for Greece.
The average of inward FDI as a ratio of GDP for Turkey, Romania and Bulgaria was 8.1%.
Shipping, fuel and tourism
More than one third of the value of merchandise exports is accounted for by fuel and the import content is high.
The European Commission says Greece controls 16% of international shipping, making it the world’s largest shipping nation. It is located along one of the world’s busiest international shipping lanes – the Suez Canal and the Mediterranean – and at the crossroad between three continents.
Shipping accounts for about half of the value of services exports and contributes about 6% to GDP but many of the 165,000 employees in the sector are foreign nationals.
The European Commission says that comparing 2009 to 1995, the share of transport services has almost tripled while that of tourism related services has decreased by about one third; however, taken together, both sectors still make up around half of Greek export value added.
Low wages and devaluation
Wages are already low and Guntram Wolff, of the Bruegel think-tank, concluded in a blog comment this month: "Overall, I conclude that the Greek economy would not benefit as much as hoped for from a rapid depreciation. The reasons for the weak Greek export performance might primarily lie in other factors such as rigid product markets, a political system preventing real change and guaranteeing the benefits of the few, the lack of meritocracy among other factors."
Theodore Pelagidis, a professor of economics at the University of Piraeus, Greece, and fellow of the Brookings Institution, wrote last September that "reducing private sector wages did little to make the Greek economy more competitive because this was never the real problem."
He said in addition to legacy problems, "the failure of the internal devaluation to improve Greece’s export performance resulted from increasing costs and placing new risks and burdens on the productive economy that cancelled out any competitiveness gained from the fall in labour costs. For example, as part of the adjustment program Greece had proceeded to significantly increase excise taxes on energy used in productive activities. After increases in energy prices for industrial use of over 60% since 2009, according to Eurostat data, Greece is now a country that has a unique combination of high prices in both electricity and natural gas for industrial use, as a result of the unique combination of high taxes and the politically sanctioned price increases of the state-controlled dominant electricity producer."
In addition: "The high cost of money and the need to deleverage corporate balance sheets created an uneven playing field in export markets as companies within the euro area were facing a fraction of the costs Greek companies were facing."
Cinzia Alcidi and Daniel Gros concluded in 2012 that a large multiplier effect of austerity coupled with the poor export performance meant that the recession was worse than in for example Portugal.
The European Commission economists concluded: "Greece exports significantly less than what a standard gravity model would predict. According to our preferred specification, the gap in Greek export VA (value added) amounts to 33% compared to what regular international trade patterns would predict on basis of Greek GDP, the size of its trading partners and geographical distance."
Greece has improved its overall rank in the World Bank's Doing Business rankings from 100 in 2012 to 65th position in the "ease of doing business" ranking published last October [pdf]. It compares with 13 for Ireland, 56 for Italy, 46 for Rwanda and 25 for Portugal. However, there are areas where no progress has been made.
Greek goods exports in 2013 were valued at €30bn and services were valued at €25bn while there was a trade deficit of €5.4bn, according to the Hellenic Statistical Authority.
GDP was valued at €226bn giving an export ratio of 24%.
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