Friday, 20 April 2018

How did Greek merchandise exports fare these past 10 years?

To celebrate the fact that Greek merchandise exports recently broke above September's 2013 highs (insert irony here) I thought I'd do a post to showcase the contribution of each sector to the past 10 years' change.

source: Eurostat, own calculations
 
One peculiarity of Greek merchandise exports (or rather one of many) is that despite us not being a oil-producing country, these few past years, Oil Products' exports grew significantly and now account for a sizeable chunk of total exports. This is because the country has two oil-refining conglomerates that are rather big compared to both the country's industrial sector and especially compared to its minuscule goods-exporting sector. The fact that when internal demand collapsed (something that coincided with a period that they were either undertaking, or had just undertook, big investment programs) they managed to channel surplus production abroad, preventing their capacity utilization from falling to ridiculously low levels, serves as evidence that it is always easier for large firms to be/become export-oriented. 


source: Eurostat, own calculations

Using SITC (Standard International Trade Classification) data I tried to map the performance of the 10 sectors that this particular classification divides merchandise exports into. I compared the level of February 2018 with that of September of 2008 (which was when Greek exports peaked prior to the Great Financial Crisis, that resulted in international trade plunging  significantly between late 2008 and 2009) and I used 12-month moving sums in order to smooth out monthly fluctuations. 

During the aforementioned period, the 12-month moving sum of Greek merchandise exports grew by a bit more than 8 billion Euros. The following chart shows each sector's contribution to the headline figure. 


source: Eurostat, own calculations

As you can see, Oil Products' contribution dwarfs those of the rest of the sectors. In order to be able to get a sense of the relative importance of the other sectors' contributions too, here's a chart where I omitted the figure for Oil Products.
 

source: Eurostat, own calculations


The sectors that fared better are mostly those with a low technological content (with the exception of chemicals). This very fact speaks volumes about Greece's economy and why wages in the country are so low (hint: because a low technological content usually implies that gross value added per worker is also low). 

With the pictures above into mind, I think that a chart showing how Greek exports ex-Oil Products did wouldn't go amiss.

source: Eurostat, own calculations

Anyway, it's got awfully late over here in Athens, which only means that my epilogue is going to be a botch job. As the post made obvious, Oil Products accounted for the lion share of Greek merchandise exports' growth these past 10 years. The rest of the sectors' exports did move forward albeit with baby steps (although the pace of their advance seems to have picked up a bit lately). Here's to hoping that Greece will manage to get its act together sometime in the near future (*laughs*).

Tuesday, 16 January 2018

The forgotten ones: Greece's ultra long-term unemployed

Unemployment in Greece has been decreasing these past 4 years but I'm afraid that this only means it went down from ridiculously high levels to what can be charitably characterized as pretty damn high levels. Still, it is a start (hopefully) and it is definitely better than nothing. 

source: ELSTAT, own calculations

It is interesting to drill down a bit deeper than headline figures and take a look at long-term unemployment and contrast its behaviour with that of short(er)-term one.

First of all, it should be noted that in Greece, the long-term unemployed (defined as those people that are unemployed for more than 12 months) account for a much higher share of total unemployment, than they do in the Euro Area as a whole. What's more, the spread between the two figures has grown during the current depression, while at the same time long-term unemployment's share even seems to be increasing in Greece.

source: Eurostat, own calculations

Eurostat publishes a detailed breakdown of unemployment figures according to the length of the unemployment spell. If we re-base those separate series to each one's respective peak we can assess a couple of different things. First, if shorter-term unemployment peaked earlier than longer-term quintiles and second, if unemployment duration is correlated to how fast each series decreased after it reached its peak.

Here's the relevant chart. I apologize for it being a bit bungled up but I guess that in order to make visual comparisons "possible", it couldn't be any different.

source: Eurostat, own calculations

The answer to both questions posed above is more or less positive. Short-term unemployment (less that 12 months) did indeed peak first and decreased faster after that. At the same time, ultra long-term unemployment (more than 48 months) peaked last with 2017 being the first year during which it has posted a hesitant decrease. Interim long-term unemployment cohorts broadly follow along these lines (12-17 months unemployment peaked and started decreasing faster than 18-23 and 24-47 but on the other hand, 24-47 unemployment decreased faster than 18-23).

If one wants an alternative representation of unemployment in Greece based on how different duration cohorts evolved here it is.

source: Eurostat

The chart makes more than obvious how ultra long-term unemployment (> 48 months) is not really budging.

It would be interesting to try and compile the profile of the people that find themselves locked into that seriously detrimental state that is ultra long-term unemployment.

While international and local media make a lot of noise about youth unemployment, the elephant in the room, as far as long-term unemployment is concerned, is old-age unemployment. People over 45 years old account for about 40% of the long-term unemployed with their ranks having swelled considerably after the depression broke out. To be precise though, the trend towards older-age unemployment accounting for a bigger chunk of long-term unemployment has been there for quite some time and is more structural in nature.

source: ELSTAT

The sectors from which the long-term unemployed come from are all over the spectrum. This makes sense since, especially before the crisis, virtually all sectors of Greece's economy were mostly inward-oriented meaning that the sudden-stop and ensuing collapse in domestic demand hit all of them.

source: ELSTAT

On top of the rank one finds "persons that cannot be classified" which probably stands for people that either refused to answer the relevant question or for younger people that have yet to hold their first job.

To wrap this up, while everyone is going on about youth unemployment a thought should be spared for the older-age unemployed too. These people face considerable challenges, namely skill-sets that have become obsolete, social exclusion, a lower probability of having family to support them through this etc. Also, the most-efficient re-allocation mechanism (i.e. the market) has chucked them out and they mostly have to depend on active labour market policies (ALMPs) and the Greek state's limited financial means to fund these. Fingers crossed for all the people that find themselves in that psychologically (and potentially physically) scarring situation and let's hope that an investment boom (now how improbable does that sound?!) will lift all boats and get them back into the fold.

Wednesday, 22 November 2017

Greek governments and GDP forecasting: not a good match

It was state-budget submission time in Greece yesterday and as it is natural I guess, out of the whole budget, most people paid attention to a few figures, namely the primary surplus envisaged and the GDP growth rate projection. In this post I'd like to zero in on the latter. 

The GDP growth rate projected by the respective Greek government is regarded with heavy scepticism (bordering on irony) by both the press and the wider public. Hence, I believe that it would be interesting to look at what the actual data tell us.

The data I'll look at here are those concerning those budgets that are available in the Hellenic Finance Minstry's website, i.e. those from 2007 onwards.  

Here's how these projections stack up against actual growth rates.

source: Eurostat, Hellenic Finance Ministry

And here is the same chart but in a slightly altered form. A positive reading means that, GDP-wise, things turned out better than envisaged while a negative one that they turned out worse.


source: Eurostat, Hellenic Finance Ministry, own calculations

If we look at the chart above and break it up in sub-periods according to which government was in office so as to evaluate their GDP-forecasting skills (or should I amend this to "the Finance Ministry's forecasting skills while they were in office"? hmm) we can see that: 

- the 2007 - 2009 ND government (not in office when the 2010 budget was voted though) didn't do very well, as far as GDP forecasting is concerned.
- the 2009 - 2011 PASOK government (not in office when the 2012 budget was voted upon, but only just) didn't do that well either.
- the Nov 2011 - May 2012 PASOK - ND - LAOS coalition government under Loukas Papademos' projections proved to be too optimistic as well (of course the time between them coming into office and voting on the budget was too short).
- the 2012 - 2014 ND - PASOK government has the most stellar record among those commented upon here since in both of the years that they were in office GDP turned out better than projected.
- finally the Syriza - ANEL - Greens coalition government's performance is a mixed bag since 2015 turned out far worse than predicted, while 2016 turned out better and now 2017 is en route for a miss (since for the 2,7% projection to come into fruition Greece's GDP has to grow by ~4,85% on average in the two remaining quarters of 2017).

There's a number of reasons that those forecasting misses can be blamed upon, e.g. the change in trend which is when projection misses usually occur, the depth of the recession that was hard to forecast etc. but the fact remains that Greek governments and GDP-forecasting are definitely not a match made in heaven.

I'll wrap this up by way of posting a chart showing what Greece's GDP would be today if government projections were proved to be correct vs. where it actually stands. 


source: Eurostat, Hellenic Finance Ministry, own calcualations

Makes you wish they'd got it right, eh? If they had, Greek GDP would be ~25% higher today...


Friday, 20 October 2017

The Odyssey of the Greek Middle Class

It is said that a country's middle class is the bedrock of its democracy. Hence, saying that its prosperity should be considered tantamount by anyone who believes that democracy is the optimum form of government, cannot be dismissed as  an exaggeration. But what happens in a country such as Greece where household incomes have been clobbered by a depression that saw GDP decrease by as much as 28% (peak-to-trough)? How did the Greek middle class fare throughout the depression?

First, one has to define middle class. ELSTAT's household budgets survey divides households into eight income classes. My intention is to deem the lower two income classes (0 - 1100 EUR) as the "lower class", the middle four ( 1101 - 2800 EUR) as the "middle class" and the two highest (>2801) as the "upper class".

So, what happened to the Greek middle class? Did it suffer the same fate that Greek GDP did?

Well, as counter-intuitive as it is, it actually didn't dwindle. On the contrary, it grew. In 2016 the aforementioned definition of Middle Class accounted for ~54% of Greek households compared to 49,5% in 2008.

source: ELSTAT, own calculations

Of course this can be attributed in its entirety to the fact that what was defined here as the "Upper Class" lost 2/3 of its pre-depression mass. Most likely the households that left the two upmost income brackets migrated to those "right" below (although one can hear plenty of anecdotal evidence of much more extreme moves across brackets). At the same time, the "Lower Class" doubled in size so that in 2016 it accounted for ~33% of Greek households compared to ~15% in 2008.

The next graph charts the change in the number of households in each income class.

source: ELSTAT, own calculations
If we combine data from this chart with those from the next one (which depicts what chunk of middle class' total, households belonging to each of its four income classes account for) we can see that contrary to 2008 when the lower brackets represented about 45% of total they now correspond to a bit more than 55%. So, despite growing slightly in size, it becomes evident that Greece's middle class has, on a whole, become poorer. Now that is definitely more intuitive.

source: ELSTAT, own calculations
  
All in all, contrary to what someone would expect Greece's middle class didn't dwindle in number but it certainly hollowed out. Despite the move downwards already in place, insecurity and low morale due to the threat of even further downward mobility are hanging above Greek Middle Class' collective head like Damocles' sword. Here's to hoping that Greek middle class will hold.

Friday, 22 September 2017

The Greek manufacturing rebound charted.

Anyone casting even a furtive glance at Greek macro data must have noticed that Greek manufacturing is currently staging a much needed bounce. A bounce that still belongs to the "too little too late" category if one compares its magnitude to that of the massive contraction that the sector underwent during the 2008 - 2012 period. Let's drill down a bit more and look at the specifics of this bounce and the underlying situation in individual sub-sectors.

source: ELSTAT, own calculations

In case someone wants some perpective, it should be remarked that the lowest the overall production index got was 30,3% off its highs and that the current bounce brings it 10,4% off its lows, i.e. it currently stands 23,1% off its late-2007 highs.  

source: Eurostat, own calculations

I thought that it would be very interesting to see the overall index's moves de-composed into these of its main components (unfortunately the narrowest de-composistion ELSTAT offers, includes 24 sub-sectors and since I couldn't find a similar methodological explainer for Eurostat so I went for that) so I re-constructed the headline index from scratch. The resultant index wasn't an exact replica (for reasons that obviously elude me) of the original but it was decent enough I think. Anyway, here is how it stacks up compared to the real thing.


source: ELSTAT, own calculations

And here is the decomposition. I know one gets woozy by all the tiny coloured bars but I did my best to give somewhat flashier colours to the index's main components (i.e. Food ~ 19,87%, Oil Products ~ 15,08%, Basic Metals ~ 7%, Beverages ~ 8%, Non-metallic Minerals ~ 8% of total).


source: ELSTAT, own calculations

The current rebound's catalysts are mostly oil products, basic metals and pharmaceuticals while beverages and non-metallic minerals contributed too to the previous big production spike in mid-2016.

Headline figures show that momentum is currently waning but this could very well be due to one or two big sectors slowing while, beneath the hood, growth remains broad-based and buyoant. One way to see if this is the case here is to count the sub-sectors that are currently in expansion mode. 


source: ELSTAT, own calculations

It seems that, below the hood too, the rebound is indeed moderating since out of the 24 sub-sectors charted here, just 8 were expanding in July compared to a high of 21 in July 2016.  

Taking a look at individual sub-sectors, it seems that the only one going through a phase of - seemingly - unhindered growth is pharmaceuticals whose production is climbing to new highs compared to all the other sectors that still try to reach their previous highs. What's more, secondary, mostly inward-oriented sectors, have been all but annihilated by the crisis, with their current production levels hovering at about 20% of their pre-crisis highs.


source: ELSTAT, own calculations


To wrap this up, the current rebound in Greek manufacturing is decent in magnitude but it currently appears to be slowing. It remains to be seen whether it will gain steam again of the current policy mix of over-taxation, high energy costs and cost-of-capital will make it succumb to the pressure.

Saturday, 12 August 2017

Greece's Consumer Price Index components analysis for 2010 - 2017

For quite some time now I wanted to take a look at Greece's Consumer Price Index in order to gauge each of its components' contribution to the headline figure. I somehow though never got round to it. Now, during a viciously hot August in Athens that makes sleeping at nights "a tad" harder, I finally managed to sit down and do it.

I used the 12 sub-indices that ELSTAT publishes along with their respective weights to translate their monthly, year-on-year, changes into their contributions to the headline figure. If those are used to re-construct the overall index, this is how the constructed index compares to the actual one. Good enough, I think. 

source: ELSTAT, own calculations

Since 2014 ELSTAT is supposed to revise the sub-indices' weights every year according to the Household Budget Survey, something that undoubtely improves the National CPI's quality and representativeness. That said, I haven't managed to find any revised weights for 2017... *sigh*

So, here's the relevant chart. 

source: ELSTAT, own calculations
As it is plain to see, the drivers of the 2010-2011 inflation spike were none other than the sub-indices covering the sectors for which indirect taxes were hiked (i.e. housing, transportation, food, alcoholic beverages and tobacco) while the rebound in crude prices in 2010 and the first half of 2011 also played a role.

Also interesting, that the main drivers of the second leg of the infamous Greek deflation were the sub-indices that where affected by the fall in crude's prices (i.e. housing due to heating oil and transportation). On the contrary, its first leg was significantly more broad-based but, as mentioned in an older post, since the turning of headline inflation to negative territory was preceded by an analogous move of the import price index, the catalyst also seems to be not domestic.

The signing of the 3rd Greek MoU in July 2015, which foresaw a hike in VAT for food items and the tourism sector, translated into inflationary pressures stemming almost exclusively from these two areas.

Finally, the move from deflation to inflation in early 2017 was driven from those sub-indices that were affected by the positive year-on-year change in crude prices, i.e. housing and transportation, while the tourism sector also contributed.

To wrap this up, it seems that some of the policies pursued due to the Greek MoU were not deflationary at all. On the contrary, they proved to be rather inflationary since their result was the highest inflation reading for Greece post-2000, in 2010. On the other hand, the notorious Greek deflation was mostly due to import prices falling, while the catalyst behind Greece's swing to positive inflation in 2017 was also a change in import prices, this time a surge.


P.S. In case someone's interested, here's the evolution of CPI sub-indices' individual weights. The increased importance for food items and housing will probably work towards making Greek CPI more volatile.

source: ELSTAT

Sunday, 11 June 2017

One feature of the current emigration wave out of Greece left unsaid.

The current emigration wave out of Greece is certainly well documented and remarked-upon. It is often compared and constrasted with past emigration waves, mostly with that of the '60s that saw droves of Greeks flocking to western Europe (mostly Germany), the US etc. There is one feature of the current wave though that sets it appart from past ones. Current Greek emigrants don't seem to be sending money back home. 

Quite a lot of countries, mostly EMs, depend on worker remittances to shore up their current account balances. Greece did, in part, during the '60s and '70s. Although, detailed data regarding remittances flowing back into Greece for those decades do not exist, a simple look at secondary income balance shows that this was quite prevalent during the 1960-1970 period (flows from the EU after the country's accession in 1981 are easily distinguishable, since the secondary income balance deteriorated as the economic situation in Greece was improving and emigrants started coming back and exploded upwards in the 80s).

source: AMECO, own calculations

If we look at worker remittances data for the present period we come across a paradox. As the emigration wave out of Greece gained steam, workers' remmitances declined and as of now, haven't picked up.

source: Eurostat

Now, one can spin a ton of different explainers on this (new emigrants are young and don't have families of their own to support back home / due to EU-induced freedom of movement people take their families with them / since a lot of recent emigrants are highly educated their families are mostly well-off hence not in dire need of support / they barely make ends meet in their new home country so there' nothing left to send back home etc.) but in order to draw data-based conclusions  one needs detailed data which I don't have.

It is worth remarking that this is not the case in other countries of Southern Europe, which witnessed similar emigration waves these past few years. Both in Italy and Portugal, worker remittances picked up along with emigration flows.

source: Eurostat

source: Eurostat


Given the dire economic situation in Greece and the relevant historical patterns of emigration, the lack of remittances sent back home from the fresh wave of Greek emigrants seems peculiar but it might be explained by the characteristics of the households sending emigrants abroad as well as the households that the emigrants set up in their destination countries.