Monday, December 11, 2017

Greek GDP Prospects: Housing And Tourism

Understanding Gross Domestic Product (GDP) boils down to just three numbers: consumption, investment (also known as capital formation) and trade balance.  That's it.

Understanding the Greek Depression is even easier, since it boils down to just one number: investment in housing, i.e. new home building.  As you can see in the chart below,  housing construction - the largest driver of investment in the boom years, by far -  collapsed to nearly zero (0.65 billion euro in 2016).  I don't know how far one has to go back to see similar numbers - statistics only go as far back as 1995. If I had to guess, I would say at least back to the 1970's.

Transportation equipment (new car and truck sales) have also come down, while the rest of the sectors are basically unchanged.
The chart also points to how the Greek economy may revive. Given that a massive boost in consumption is unlikely with constricted personal incomes, substantial growth can only come from two sectors: construction and tourism (i.e. service exports).

How are things there? There is good news on both.

  • After ten years of constantly dropping (chart below), private sector building permits are finally on the rise.  Year to date (Sept. 2017) the number of permits are up +8.6% and the surface area +16.8% versus 2016.  There are more, and bigger, buildings being constructed in Greece this year.  

  • Tourism is going very well in 2017.  For the first nine months tourist arrivals and receipts were both up 10% and it looks like the fourth quarter is up strongly, too. Tourism is the single largest industry, accounting directly for roughly 8% of GDP and nearly 20% when all effects, indirect and induced are accounted for, so a strong showing there has a multiplier effect on the economy.

Strength in the tourist sector is also attracting capital investment, so we have a rather nice one-two punch going on here.

Assuming consumption does not take a dive (unlikely, given the robust increase in tourist arrivals), GDP should show a healthy rise in 2017, gathering momentum for 2018.

P.S.  Interestingly, new car sales are up, too: +21.6% ytd in September.


  1. Glad to see you back - like to run some numbers on Ireland? Our residential housing is bubbling again. Brexit blues has many folk in a dither.

    Cheers, Brian.

  2. Hi Brian, Ireland happens to be one of my favorite subjects. The country went from being the poorest European nation in the 1970s, to the second richest in GDP/person today, after Luxembourg (PPP terms). I admire how you guys agreed to create wealth via a massive revamp in education, creating high value jobs via knowledge..

    Even the PIIGS snafu only affected you for a short while, and then off you went again to higher highs..

    I will do an Ireland special soon !