KEPE: The greek economy has left the specter of recession but…

KEPE: The greek economy has left the specter of recession but…


By Spiros Sideris – Athens

The Greek has gotten out of the specter of recession and in the coming years it is expected to enter a period of strong recovery, which however, remains fragile because of the uncertainty surrounding the political situation in the country and the negotiations with the Troika. This is mentioned in the latest Monthly Economic Report, the Centre of Planning and Economic Research (KEPE).

As KEPE notes, the Greek economy has entered a recovery phase from the second quarter of 2014, while, according to the most moderate scenario in KEPE’s study, the Greek economy can grow at an average annual growth rate of around 2,4% by 2020. The cumulative effect on the GDP is estimated to be up to 17%, while in the optimistic scenario, the cumulative increase is estimated at 20%.

Overall, according to KEPE, it can be concluded that at this juncture the greek economy is out the specter of recession, with growth expected to be strong for years to come. Key macroeconomic and some leading indicators seem to confirm this trend. However, at this stage the recovery remains fragile, due to specific pathogens existing in the economy and of the uncertainty due to the political developments and negotiations with the partners. The uncertainty seems to be reflected in the spread of Greek bonds, but also the drop of the greek stock market.

Specifically, the General Index of the Athens Stock Exchange on 14.11.2014 stood at 883.54 points, continuing the steep downward trend in recent months, with increased realised volatility. The reverse course of the greek stock market, compared to the other international markets, seems to be associated with basic idiosyncratic characteristics of the economy.

Furthermore, uncertainty regarding the election of the President of the Republic and the lack of consensus on the necessary structural reforms appear to outweigh the positive macro-economic data and positive results of the stress tests.

The spread of the 10-year greek government bonds on 11.14.2014 stood at the level of 7.26%, maintained at significantly high levels, nearly three times higher than the levels of other peripheral European economies, such as Portugal and Spain. The rise in the spreads concerns mainly basic characteristics of the greek economy and the risk the country represents, associated with the political uncertainty, but also with the open discussions with partners for the assessment of the greek economy.

Moreover, as noted, the KEPE GRIV index (“fear” index) stood on October 31, 2014, at a level slightly higher than the historical average period of 2/1/2004 – 31/10/2014 (34.5%), at 36.27%. The average for the whole month of October stood at 32.63%, slightly higher than in September, when it stood at 31.75%.