Friday, 7 November 2014

What's next for Greek tourism

It is no secret that the apparent bottoming of Greece’s economy can be attributed solely to tourism. Hence, the million dollars question is what does the future hold for the sector and if its contribution will remain positive and that significant.

One, tourism-related, data-point that isn’t getting much attention lately is the prices trajectory for tourism-related services.

source: Eurostat

As you can see in the chart above, prices have almost stopped falling. How will it affect demand if prices start rising? I think the next chart could be interesting in that respect.

source: Bank of Greece, Eurostat, own calculations

The key takeaway if you ask me is that causality has changed. In the pre-crisis years featured in the chart, prices’ rise slowed when demand slowed. In the crisis years I think that demand rose when prices plummeted. One more fact for us to chew on is that during 2014, when prices fall decelerated, growth in demand also decelerated. Of course, the sector’s exports cannot keep growing with the same rate as they did in 2013 when the base effect was also at work. Also the slowdown evident in Europe could be having an effect here as well as a number of other factors.

To wrap this up, the question the answer to which Greece’s tourism sector is pondering right now is, what happens if prices in tourism-related services start rising (and they eventually will). I won’t get into the whole “the sector needs investments to improve the quality of services offered etc.” tirade since you’ve probably read the same points a million times already. Let’s wait and see what the future holds for the sector and since the sector is at present the sole driver of the Greek economy, for us as well.


Thursday, 23 October 2014

What part of Greece's industrial capacity was lost during the depression?

Quite a lot of commentators, whose views I come across, think that Greece can survive solely on tourism. Well, betting your survival on an industry with such high income elasticity is not ideal or advisable if you ask me. Hence, there are quite a lot of posts concerning manufacturing in this blog regardless of the fact that Greek manufacturing is, well, hopeless. But I am digressing here when the reason that I decided to write this post was an observation I made. 

If one takes a look at capacity utilization for Greek industry then she/he will realize that it has reached levels last seen in 2010.

source: Bank of Greece

Industrial Production on the other hand, if we re-base data to the first month of 2010 tells a different story (the data as a whole are based on 2010 so this won't make much of a difference).

source: Eurostat, own calculations

No matter whether we use industrial production (which is skewed a bit by the incessant fall of electricity production) of manufacturing production, the index currently lies about 15% lower than its level on the first month of 2010.

At first this may come across as a bit of a puzzle but what this differential shows, in my humble opinion, is what percent of production capacity was lost these past five years.