It was state-budget submission time in Greece yesterday and as it is natural I guess, out of the whole budget, most people paid attention to a few figures, namely the primary surplus envisaged and the GDP growth rate projection. In this post I'd like to zero in on the latter.
The GDP growth rate projected by the respective Greek government is regarded with heavy scepticism (bordering on irony) by both the press and the wider public. Hence, I believe that it would be interesting to look at what the actual data tell us.
The data I'll look at here are those concerning those budgets that are available in the Hellenic Finance Minstry's website, i.e. those from 2007 onwards.
Here's how these projections stack up against actual growth rates.
|source: Eurostat, Hellenic Finance Ministry|
And here is the same chart but in a slightly altered form. A positive reading means that, GDP-wise, things turned out better than envisaged while a negative one that they turned out worse.
|source: Eurostat, Hellenic Finance Ministry, own calculations|
If we look at the chart above and break it up in sub-periods according to which government was in office so as to evaluate their GDP-forecasting skills (or should I amend this to "the Finance Ministry's forecasting skills while they were in office"? hmm) we can see that:
- the 2007 - 2009 ND government (not in office when the 2010 budget was voted though) didn't do very well, as far as GDP forecasting is concerned.
- the 2009 - 2011 PASOK government (not in office when the 2012 budget was voted upon, but only just) didn't do that well either.
- the Nov 2011 - May 2012 PASOK - ND - LAOS coalition government under Loukas Papademos' projections proved to be too optimistic as well (of course the time between them coming into office and voting on the budget was too short).
- the 2012 - 2014 ND - PASOK government has the most stellar record among those commented upon here since in both of the years that they were in office GDP turned out better than projected.
- finally the Syriza - ANEL - Greens coalition government's performance is a mixed bag since 2015 turned out far worse than predicted, while 2016 turned out better and now 2017 is en route for a miss (since for the 2,7% projection to come into fruition Greece's GDP has to grow by ~4,85% on average in the two remaining quarters of 2017).
There's a number of reasons that those forecasting misses can be blamed upon, e.g. the change in trend which is when projection misses usually occur, the depth of the recession that was hard to forecast etc. but the fact remains that Greek governments and GDP-forecasting are definitely not a match made in heaven.
I'll wrap this up by way of posting a chart showing what Greece's GDP would be today if government projections were proved to be correct vs. where it actually stands.
|source: Eurostat, Hellenic Finance Ministry, own calcualations|
Makes you wish they'd got it right, eh? If they had, Greek GDP would be ~25% higher today...