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European CommissionThe Second Economic Adjustment Programme for Greece. Fourth ReviewGraph 1. Economic climate tracerGraph 2. Economic Sentiment Indicator andPurchasing Managers Index3downswingexpansion130LevelLevel70level210-1-2-3May-10Jan-00Mar-14120110100908065605550454035-4contractionupswing-0.6 -0.4 -0.2 0 0.2 0.4m-o-m changeSource: European Commission services' calculations.Graph 3. Production indicators: industrialproduction, retail turnover and building permits702008 2009 2010 2011 2012 2013 2014ESI (lhs)Source: MarkiIT, European CommissionPMI manufacturing (sa, rhs)Graph 4. Exports of goods and services and exportsof travel services30y-o-y % change50-5-10-15-20-502012 2013 2014Industrial Production IndexRetail trade volumeBuilding permits (12mma) (rhs)Source: EL.STAT.Graph 5. Contribution of GDP components to GDPgrowth105%forecast0-5-10-15-20-25-30-35-40-45y-o-y % ch.,6mma252015100500-05-10-15-202010 2011 2012 2013Source: Bank of Greece.Exports of goods and servicesExports of travel servicesGraph 6. Labour market: unemployment rate vs.changes in employment1.00.530250-5-100.0-0.5-1.0-1.5201510-152005 2007 2009 2011 2013 2015 2017External balance of goods and ServicesChanges in inventories and net acquisition of valuablesGross fixed capital formationTotal consumptionGross domestic product at market prices (y-o-y %)Source: European Commission services' calculations.-2.05-2.502010 2011 2012 2013Employment growth (%, lhs) Unemployment rate (%, rhs)Source : EL.STAT and European Commission services' calculations.12
2. Macroeconomic and financial developments6. The programme projections point to a positive annual GDP growth rate of 0.6% in 2014. Thegrowth of the Greek economy is expected to pick up in the course of 2014 and beyond, supported bystrengthened exports and investment on the back of improving competitiveness resulting from thestructural reforms undertaken in labour and product markets. Overall, investment is projected to turnaround, led initially by publically funded investment stemming from the restart of the motorwayprojects in H1 2014 and faster absorption of EU structural funds. The improved business environment isexpected to attract more private investment. Tourism is likely to register another strong year, assuggested by the rapidly rising early bookings’ from the EU; last year’s EU arrivals still were some20% below their 2007 peak. The recent negative contribution to export growth from transportationservices is forecast to fade out, as the slump in international shipping bottoms out. The bankrecapitalisation process and fiscal stabilisation are set to support growth. Nevertheless, despite thegradual improvement in the labour market, private consumption is still expected to decline slightly inline with disposable income developments. Falling prices have mitigated the impact of recent wageadjustment. Prices are expected to continue falling during 2014.7. The economic recovery is expected to accelerate, with GDP growth reaching 2.9% in 2015 and3.7% in 2016. Private consumption is expected to begin to turn around in 2015. Private investment isexpected to strengthen as credit conditions improve, supported by a swift and efficient resolution ofnon-performing loans, and the further clearance of government arrears injecting much-needed liquidityinto the private sector. The programme projections also expect significant increases in agro-foodexports, where export and credit growth has already been observed over the last year. Greek exportperformance is projected to continue to strengthen on the back of improved labour cost competitiveness,increasing trade credit and a more conducive external environment. However, given that structuralchanges require time, issues of the small size of establishments, a limited export base, and overregulationwill still weigh on overall outcomes (see Box 3).8. Prices, as measured by the GDP deflator, have been falling faster than projected so far under theprogramme. The 2013 GDP deflator was revised down to -2.1% compared to a forecast of -1.1% inJuly 2013, with important methodological changes affecting this price measure 2 . Lower prices haveoffered some additional support to household purchasing power and impacted positively on pricecompetitiveness. The HICP index fell by 0.9% in 2013 (against a forecast of a fall of 0.8% in July2013). HICP inflation is expected to remain in negative territory also in 2014 and only gradually pickup thereafter.9. Total employment is forecast to start growing again and increase by 0.6% in 2014 and by 2.6% in2015. The ratio of unemployment has reached 27.3% in 2013. Against the background of high level ofunemployment and wage agreements suggesting moderation, a further decline in compensation ofemployees by 1.5% is expected.Graph 7. Growth in nominal compensation peremployee and unemploymentGraph 8. Monthly HICP developments and annualaverages302520151050%2005 2007 2009 2011 2013 2015 2017Unemployment rate total (Eurostat Definition)forecastNominal compensation per employee (total economy, growth rate) (rhs)%6420-2-4-6-8-1076y-o-y %forecast54Annual average3210-1-2-3-42005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Monthly HICPSource: European CommissionSource: European Commission2 The recent ELSTAT GDP data revision involved changes in the methodology of calculating the GDP deflator in the results of the quartersof 2012 and 2013. This addressed a significant and persistent discrepancy between the GDP (output side) deflator and the GDP(expenditure side) deflator, which created bias in the results of the estimates of volume and price changes in the quarterly accounts.13
Page 2 and 3: Occasional Papers are written by th
Page 5 and 6: OUTLINE OF THE REPORTEXECUTIVE SUMM
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European CommissionThe Second Econo
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4. DEBT SUSTAINABILITY ANALYSIS AND
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4. Debt sustainability analysis and
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4. Debt sustainability analysis and
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Table 12. List of Milestones to be
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ANNEX 2: MACROECONOMIC FORECASTANNE
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ANNEXTable B1: USE AND SUPPLY OF GO
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ANNEXTable C1: FISCAL ACCOUNTS AND
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ANNEX 3: UPDATED PROGRAMME DOCUMENT
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Memorandum of Understanding on Spec
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OCCASIONAL PAPERSOccasional Papers
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No. 46No. 47No. 48No. 49The Western
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No. 80 2011 Pre-accession Economic
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No. 119No. 120No. 121No. 122Possibl
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No. 1582013 Economic and Fiscal Pro
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