WSJ: Economy Creeping Back, Greek Manufacturing Sector Rebounding

Αssociated Press

FILE - A man walks outside the headquarters of the Bank of Greece, in central Athens, on Monday, Jan. 28, 2019. (AP Photo/Petros Giannakouris)

With wary investors waiting to pounce and make a killing, Greece’s slooooow return from a near-decade long economic crisis is getting a surprise boost from its long-dormant manufacturing sector that’s grinding back.

In a feature, The Wall Street Journal said that, "Greece is reporting the highest manufacturing performance of all countries tracked by data firm IHS Markit. Toggle the chart below to switch between the ranks and nominal values for each country. Values higher than 50 indicate expansion, while values lower than 50 indicate contraction."

It’s all so much business gobbledygook to most people, especially workers, pensioners and the poor punished for years by successive governments with big pay cuts, tax hikes, slashed pensions and worker firings while politicians, the rich, tax cheats and Parliament workers exempt from prosperity ducked the axe.

But indicators watched by investors, such as box orders and manufacturing reports are more positive for Greece, wracked repeatedly in virtually every sector since 2010, from construction to real estate and most everything in between.

The crisis saw the economy shrink 25 percent, the unemployment rate pass 25 percent and debt levels hitting 180 percent of the Gross Domestic Product (GDP) and leave an indelible depression-level mark statistically and emotionally, draining many.

Curiously, Greece’s manufacturing comeback comes at a time when factories around the world aren’t doing well, indexes of activity show with the cycle swinging in favor of Greek companies finally.

“The negative side of the coin is that we are not as open as other economies,” Panos Tsakloglou, an economics professor at the Athens University of Economics and Business told the paper. “The positive flip side is if there is a slowdown in the world economy, the impact is not as great in Greece.”

Greece’s manufacturing sector is relatively small and concentrated in industries such as food and drink which have mostly escaped the worldwide slowdown in manufacturing, just at the right time for Greece as it crawls back from the brink.

It took three international bailouts of 326 billion euros ($365.49 billion) that began in 2010 and ended on Aug. 20, 2018 to keep the economy from going under, pushed down by generations of wild spending and runaway political patronage.

The statistics that make most people’s eyes glaze over but are closely watched indicators by professionals are tilting toward Greece’s favor. In November, Greece’s manufacturing purchasing managers’ index (PMI) was 54.1, its 30th month above 50, showing growth.

How much growth is in dispute although Prime Minister and New Democracy leader Kyriakos Mitsotakis, who is actively courting foreign investors that the former ruling Radical Left SYRIZA didn’t want, has raised his estimates too after playing it down.

The PMI is based on a regular survey of purchasing managers by IHS Markit, a firm specializing in financial and economic data and analysis. Greece’s manufacturing is domestically focused, meaning goods like machinery and metals are more likely to be sold at home than is the case in other countries, the paper noted.

The country is less integrated into global supply chains, an advantage when there are trade battles between countries that hold back exports.

“In Greece, we have a more stable the cost of not more extraordinary performance,” said Nikos Magginas, Chief Economist at the National Bank of Greece.

Greece’s growth is expected to hit 2 percent in 2020, significant for a country crippled by a decade of contraction but still modest nonetheless, showing how important the expansion in manufacturing is, and timely.

Manufacturing accounts for only about 10% of Greek economic output, a sector that has better buffering ability against swings and trade disruptions that rattle markets and more export-driven countries.

When the crisis began, Greece fell into a near-depressions with sectors across the board teetering as demand fell off the cliff, people and businesses unable to spend. In 2015, when SYRIZA took over, the manufacturing index bottomed out at 30.2 amid fears the government would take the country out of the Eurozone.

It wasn’t until 2017 that Greek manufacturing activity began to grow again, part of a broader pickup in the economy and business optimism, the report noted, adding that exports are also picking up because they are comprised of more basic goods such as pharmaceuticals, food and oil-refining products that are less sensitive to world market fluctuations, said Magginas said.

Goods exports climbed to a record 19% of Gross Domestic Product in the third quarter of 2019, said the National Bank of Greece. Service exports, a category that includes tourism and shipping, rose about 14.5% in the third quarter from a year earlier. That improvement in exports is essential to help Greece meet its fiscal targets.

With New Democracy accelerating the recovery by cutting taxes, especially the corporate rate that SYRIZA put at 29 percent while elements in the party tried to keep out foreign investors, manufacturing is leading the way.

But the comeback is still in embryonic stages. “We have quite a lot of bureaucracy, quite a lot of red tape that we have to get rid of,” Tsakloglou also said.