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.