Tuesday, 2 April 2013

Maybe Greece is a bit of a special case...

The post's title of course does not refer to comments from various finance ministers, central bank officials etc. It refers to one certain feature that the Greek economy has displayed since the adjustment program was commenced in mid-2010.

The said feature is none other than exports’ contribution to growth as opposed to the other two EZ countries who are currently en train of a similar troika-led adjustment program, namely Ireland and Portugal (I exclude Cyprus for obvious reasons).

I have plotted a few charts showing annual changes of GDP components in constant prices, as a way to replicate GDP growth contributions in an admittedly rather facile way.

source: Eurostat, own calculations

source: Eurostat, own calculations

source: Eurostat, own calculations

The plain and rather painful takeaway from the charts is that except from Greece the other two countries have displayed some (or more than some in Ireland's case) positive exports’ contribution.

Greece only witnessed a positive exports contribution in 2010, after the great 2009 trade collapse, which was nothing other than the base effect kicking in. The exact opposite goes for Portugal and Ireland where exports were positive for all three years since 2009. 

Here are the indicators mentioned above for the aforementioned countries.

source: Eurostat

source: Eurostat

My rationale was again rather simple. The higher the share of households’ final consumption in GDP the higher the hit the country’s GDP could take, while the higher the share of exports the bigger the cushion they could provide.

Unfortunately for Greece, results thus far seem to confirm this simplistic rule to a t...

P.S. Of course this does not mean that export-led growth is bullet-proof. A look at the following chart can confirm this.

source: Eurostat

As you can see exports' growth plummeted in 2012 and the variance of growth for certain coutnries was significant.

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