31 March 2017
Greece: Refugee Crisis – A Drag on the Economy
|Area||131,957 sq km|
|Currency||Euro (1 EUR = 1.1153 USD as of 22 September 2016)|
|Form of government||Parliamentary Republic|
|Major Exports (% of total, 2015)||Major Imports (% of total, 2015)|
|Mineral fuels, lubricants & related materials (29.4%)||Mineral fuels, lubricants & related materials (26.3%)|
|Machinery & transport equipment (17.5%)||Chemicals & related products (20.1%)|
|Food, drinks & tobacco (10.5%)||Machinery & transport equipment (15.5%)|
|Top three export countries (% of total, 2015)||Top three import countries (% of total, 2015)|
|Italy (11.2%)||Germany (10.7%)|
|Germany (7.3%)||Italy (8.4%)|
|Turkey (6.6%)||Russia (7.9%)|
Source: Economist Intelligence Unit (www.eiu.com)
Greece is a parliamentary republic with deputies elected for four-year terms. Following the outbreak of the Greek debt crisis in 2009, political uncertainty increased in the country which has held four snap elections since then. In the latest snap election held in September 2015, the left-wing Syriza Unifying Social Front (Syriza), led by Prime Minister Alexis Tsipras, formed another coalition with the ultra-right, nationalist Independent Greeks (AE). The government only obtained a marginal majority in the 300-seat parliament from the election. Next legislative election is scheduled in 2019. However, risk of another early election is high as there remains strong political and popular opposition to the austerity measures and unpopular reform programmes.
Externally, Greece faces the challenges of managing the refugee crisis. Greece’s shores were the gateway to the European Union (EU) for more than 856,000 refugees from the Middle East last year, according to the United Nations Refugee Agency. Though the inflows have slowed significantly this year following the closure of the Western Balkans route, but some 50,000 people remained in the country. The refugee crisis is putting pressure on the government and adding burden to Greece’s already strained economy.
|Nominal GDP (USD bn)||239.2||235.4||194.8||191.0||194.4|
|Real GDP growth (%)||-3.1||0.7||-0.3||-0.6||1.5|
|GDP per capita (USD)||21,640||21,400||17,780||17,490||17,840|
|Budget balance (% of GDP)||-13.1||-3.7||-7.3||-4.6||-3.7|
|Current account balance (% of GDP)||-2.0||-2.1||0.0||-0.1||-0.2|
|Government debt (% of GDP)||178.0||180.5||177.4||181.6||178.9|
Source: Economist Intelligence Unit (www.eiu.com)
The Greek economy has been in debt crisis since 2009, when a newly-elected Greek government revealed that its predecessors had been underreporting government budget deficits. Concerns about the sustainability of Greek public finances eroded investor confidence and shut the country out of financial markets. The Greek economy contracted by more than one-quarter during 2008-13, while unemployment rate has risen to over 25%. The Greek economy rebounded a bit in 2014, but the recovery stalled in 2015 as political uncertainty and capital controls negatively affected business and consumer confidence.
Capital controls were imposed to prevent the collapse of banking system. The country finally needed another bailout programme, the third since the debt crisis, to avoid a default on its debt. Economy in 2016 will likely remain in recession as capital controls continue to impede a recovery in confidence and output.
Greece secured the second tranche of funding after completing its first review of the Third Economic Adjustment programme in June 2016. As part of the conditions under its bailout programme, Greece has been privatizing its state assets. In April 2016, a Chinese shipping company purchased full control of the Port of Piraeus, a major multimodal trans-shipment hub in the Mediterranean and the most important sea trade gateway to Europe. The Chinese government considered it as an important step in developing the ‘Belt and Road’ initiative. The port will serve as a main entry point for Chinese exports into Southern, Eastern and Central Europe, given its strategic position and proximity to the Suez Canal.
Hong Kong-Greece Trade
Total exports from Hong Kong to Greece decreased by 3.5% from HK$1,104 million in 2014 to HK$1,065 million in 2015. The top three export categories to Greece were: (1) telecommunications, audio & video equipment (+27.3%), (2) office machines & computers (+77.0%), and (3) electrical machinery, apparatus & appliances, & parts clothing & clothing accessories (-24.5%), which represented 55.5% of total exports to Greece.
ECIC Underwriting Experience
The ECIC imposes no restrictions on covering Greek buyers. For 2015, the number of credit limit applications on Greece decreased by 20.3%, while the amount of credit limit applications increased by 7.5%. Insured business decreased by 51.8%. Major insured products were electronics, services and toys, which represented 45.0% of ECIC’s insured business on Greece. The Corporation’s underwriting experience on Greece has been acceptable, with two claim cases reported during September 2015 to August 2016, involving electrical appliances.