Tuesday, December 28, 2010

2011 Worse for Greece than 2010

No doubt 2010 was one of the hardest years ever for Greece. However, 2011 will be worse if one looks at the official projections done by the IMF and the Greek Finance Ministry. Here are some numbers.

 Real GDP is expected to decline by 4.2% in 2010, much worse than the 2.4% it fell in 2009. For 2011, the official forecasts show a decline of another 3%. Only in 2012 will the economy grow again and even then at just 1.1%. According to the program, it will take until 2013 for Greece to reach its pre-crisis nominal GDP of €236 bn – on a real basis, longer.

Inflation in 2010 was 4.6%, also much worse than the 1.3% in 2009. In 2011, inflation will remain at high rates (2.2%), and it is not until 2012 that the inflation will be sustainably lower than the Euro area average in order to accomplish the deflation process needed to restore price competitiveness.

Unemployment was 9.4% in 2009 and it jumped to 12.2% in 2010. Unlike other parameters, unemployment is forecasted to keep growing worse in both 2011 and 2012 with rates of 14.3% and 15%, respectively. This is one area where anecdotal evidence says the forecasts may get it wrong. So many of the people I meet worry that they are on the verge of losing their jobs that my sense is unemployment may end up higher.

When it comes to state finances, there is a continuous improvement forecasted. The deficit fell from 15.4% of GDP in 2009 to 9.4% in 2010, and it is set to fall further to 7.4% in 2011 and then 6.5% in 2012. At that point, spending and revenues will be aligned, with the deficit being driven by interest payments.

The primary deficit (the deficit excluding interest payments) will fall from -3.3% in 2010 to -0.8% in 2011. In 2012, Greece is expected to return to primary surpluses, so it will then start to pay down its debt. In 2012 is also the point when default / restructuring starts to make economic sense given that Greece would be able to lower taxes and/or increase spending if it did not have to pay as much to service its debt.

As for the debt itself, it is expected to go from 127% of GDP in 2009 to 141% in 2010 and 152% in 2011. By 2012, debt is expected to have peaked at 158% although it does not start to decline until 2014 (see also here).

These numbers show that sadly Greece has yet to hit bottom, at least insofar as most of the real economy indicators are concerned (GDP, inflation, unemployment). So the patience required by the Greek public and the resolve required by the Greek state – these will only need to grow in the year to come.

1 comment:

  1. Most of protests are Staged and very well Orchestrated, they pretend fighting but do not hurt each other. This is worth it to get hundreds of billions from EU. Greeks are very smart; the deception started with the Trojan Horse and is going on with very well orchestrated “PROTESTS”. If you want Greece to be paid off, for the Enormous Army, Universal Free Health Care, Lucrative Pensions, and Taxes that they never Pay, then you pay them by yourself, PAY THEM OFF, BY YOUR OWN POCKET.


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