OECD Economic Surveys : Greece 1971.

81 Pages·4.822 MB·English

by  OECD

:* b c 1C
OECD
ECONOMIC SURVEYS
GREECE
i: r ; : .\ j i n m
FEBRUARY 1971
BASIC STATISTICS OFGREECE
IUK LAND
Area (1000«j. km) 31.9 Muin urban areas (1961 census)
Cultivated area (1000 sq. km) 39.1 Greater Athens
(incl. Piraeus) 1 853000
Salonika 37(1000
THE PEOPLE
Population (1969) 88.15000 Total labour force (1969) 3866000
N" ofinhabitants per sq. km (1969) 67 Agriculture{'?<) 47.8
Net natural population increase Mining, public utilities and manu
(average, 1964-69 in per cent) 1.0 facturing Of) 15.1
Net emigration (average in per cent Construction (%) 6.0
ofpopulation, 1964-69) 0.J Servicesir/r) 31.1
PRODUCTION
UNI' (1969, billion drachmae) 252.2 Origin of GOP at factor cost
GNP per head (1969.S) 952 (1969,million drs.) 209.8
Gross fixed investment (excl. ships) AgricultureC/'O 21).3
1969percent ofGNP 26.2 Mining and Manufacturing <%) 17.7
per head(S) 249 Construction (%) 8.5
Services(%) 53.5
THE GOVERNMENT
Government, current expenditure Government current revenue (1969,
(1969, 7c ofGNP) percent ofGNP)
Government fixed investment (1969,
',; ol total investment excl. ships)
Public fixed investment, incl. public
enterprises (1969, % of total
fixed investment, excl. ships) 28.3
FORK1GN TRADE
F.xporls of goods and services Importsol goods and services (1969)
(1969) i',1 ofGNP) 12.9 (CA ofGNP) 19.5
ofwhich: Main imports (1969) <# oftotal I
lourismearnings(1969)I'i ofGNP) 1.8 commodity imports)
Hmigrant remittances (1969) ('/< Machinery other than electric 17.0
ofGNP) 3.3 Petroleum and derivatives 7.7
Main exports (1969) I'.i of total Electrical machinery. apparatus
commodity exports) and appliances 6.7
Tobacco 18.6 Roadmotor vehicles 6.3
Iron andsteel 8.8 Meat 4.7
Dried fruits 8.2
Aluminium 6.8
Fresh fruits 6.8
Cotton 5.5
THE CURRENCY
Monctarv unit: drachma Currency units per S US
NO'I'H: An international comparison ofsomehasicstatistics isgiven in Annex 'J"able K.
OECD ECONOMIC SURVEYS
GREECE
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisationfor Economic Co-operation andDevel¬
opment (OECD) was set up under a Convention signed
in Paris on 14th December, I960, which provides that the
OECD shallpromote policies designed :
to achieve the highest sustainable economic growth
and employment and a rising standard of living in
Member countries, while maintaining financial sta¬
bility, and thus to contribute to the development of
the world economy ;
to contribute tosoundeconomic expansion in Member
as well as non-member countries in the process of
economic development ;
to contribute to the expansion of world trade on a
multilateral, non-discriminatory basis in accordance
with international obligations.
The Members of OECD are Austria, Belgium, Canada,
Denmark, Finland, France, the Federal Republic ofGermany,
Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland,
Turkey, the United Kingdom and the United States.
The Socialist Federal Republic of Yugoslavia is
associated in certain work of the OECD, particularly that
of the Economic and Development Review Committee.
The annual review of Greece by the OECD
Economic and Development Review Committee
took place on 18th February, 1971.
CONTENTS
Introduction 5
I Economic developments in 1969 and 1970 5;
Demand 6
Output and employment 8
Wages and prices ]3
Foreign trade and payments 16
II Short-term economic policies 21
Budget policy 21
Monetary policy 24
III Prospects for 1971 28
IY Development policies, problems and prospects 30
Regional development 31
Saving and investment finance 37
V Conclusions 43
Annexes
1 Chronology of economic policy measures 49
II Export behaviour 55
TABLES
(a) In text :
1 Gross fixed investment 6
2 Supply and use of resources 7
3 Agricultural production 10
4 Origin of gross domestic product 11
5 Labour force and employment 13
6 Prices and wages 14
7 The balance of payments 17
Exports and imports (Customs basis) 18
Government revenue and expenditure (National Accounts
basis) 22
10 Government revenue and expenditure (Administrative basis) 23
11 Bank lending 25
12 Saving and investment finance - Plan targets and past trends 41
(b) Statistical Annex
A National product and expenditure 64
B Gross domestic fixed asset formation (current prices) 65
C Gross domestic fixed asset formation (1958 prices) 66
D Income and expenditure of households and private non-profit
institutions 67
E Industrial production 68
F Exports by commodity group 69
G Imports by commodity group 70
H Merchandise trade by area 71
I Government revenue and expenditure (National Accounts basis) 72
J Money supply and bank lending 73
K Basic statistics : International Comparisons 74
CHARTS
1 Indicators of fixed investment and private consumption 9
2 Industrial production, employment and unemployment 12
3 Prices and wages 15
4 Foreign trade cif - fob customs basis 19
5 Money supply and bank credit 26
6 New capital market issues 27
7 GDP and expenditure - Plan targets and past trends 32
8 The balance of payments - Plan targets and past trends 33
9 Indicators of regional disparities 35
10 Growth of population and industrial employment by region
(1961-1969) 36
1 1 Domestic saving and capital imports - Plan targets and past
trends 38
12 Government revenue and expenditure - Plan targets and past
trends 40
Greece
INTRODUCTION
The past two years have seen good overall economic growth. Buoyant
conditions for Greek exports and main invisible earnings contributed to
this. However, the import rise steepened, in response to the better trend
of economic activity and rising import prices, so that the deficit on the
current account of the balance of payments increased, especially in 1969.
Expansion at home and abroad helped to absorb surplus manpower, but
no overall labour market pressure has developed. Prices and costs have
been relatively stable.
Parts I to III of this Survey are devoted to shorter-term developments
in the Greek domestic economy and its balance of payments, including a
review of fiscal and monetary policy (Part II) and the prospects for 1971
(Part III). But for countries like Greece, the resolution of longer-term
structural problems also demands a high priority. An important aim of
the authorities is to achieve structural change and ensure a sound basis
for continued economic development. In the field of export diversification,
for example, progress has already been made, Part IV of the present Survey
is therefore devoted to discussion of certain longer-term policies, problems
and prospects, with particular reference to the financial aspects of the
medium-term Plan and to problems of regional development. Part V puts
forward certain major conclusions arising out of the analysis. Apart from
the regular statistical annex, this Survey includes annexes listing the
main economic policy measures taken in the past two years and reviewing
export behaviour.
I ECONOMIC DEVELOPMENTS IN 1969 AND 1970
In the past two years, the rate of GNP growth was close to the target
of the 1968-1972 Plan and the pattern of demand was brought roughly into
line with that desired over the medium-term. In particular, fixed investment
activity became less dependent on dwelling construction and last year, private
consumption growth, which had tended to fall short of targets by a consi¬
derable margin, steepened. The price rise was held within the Plan limits
for some time but, as the impact of foreign inflationary developments and
DM revaluation gradually influenced the Greek economy, domestic price
performance became somewhat less satisfactory. Balance of payments deve¬
lopments also turned out to be less favourable than officially expected.
However, provisional official estimates suggest that the growth of the
current account deficit became more moderate last year and a somewhat
more suitable composition of capital imports may be in course of
achievement.
OECD Economic Surveys
Demand
Fixed investment, the main factor behind the 1968 revival of final
domestic demand, continued buoyant and seems to have become more
broadly based in 1969. The available estimates show that while investment
in industry and the service trades had already recovered quite strongly in
1968 the investment boom in that year seems to have been initially concen¬
trated in dwellings and other, largely private, building, with only a modest
rise in investment in machinery and equipment'. The sharp upturn of the
latter in 1969, although somewhat distorted by large aircraft purchases,
suggests a more broadly based revival of business fixed investment. At the
same time, Government and public enterprise investment increased sharply ;
and dwelling construction remained buoyant, although less so than in 1968.
The boom in private fixed investment seems to have come to an end
in 1970. In large part, this reflects a radical change in residential building
activity. It is possible that the provisional figures, which are based largely
Table 1 GROSS FIXED INVESTMENT
Excluding ships
1969 1966 1967 1968 1969 1970'
Billion
Dr. Percentage change in volume (1958prices)
Building and construction 44.3 9.2 - 2.1 24.2 14.7 3.5
Dwellings 20.9 10.2 -10.6 30.6 19.5 -8.1
Other building 9.3 18.9 0.4 31.8 12.5 11.5
Construction and works 14.1 3.1 7.2 13.4 10.2 13.7
Machinery and equipment 21.7 16.2 0.5 7.9 30.5 14.9
Machinery 15.3 -3.4 9.4 8.6 27.6 22.2
Transport equipment 6.4 70.2 -13.6 6.4 36.6 1.1
Private sector 47.4 11.6 - 7.0 25.2 19.6 4.7
of which: Excluding housing 38.0 12.8 - 4.2 21.3 19.6 14.8
Public sector2 18.7 10.0 12.7 7.0 17.8 12.4
General government 11.0 n.a. 5.3 6.4 17.4 20.3
Public enterprises 7.7 n.a. 28.0 8.0 18.4 1.3
Agriculture, forestry, fishing 6.9 -2.8 13.2 13.3 4.8
Mining and manufacturing 8.1 -0.8 - 8.9 18.6 12.8
Transport, communications, gas
electricity, water 19.7 20.5 7.1 13.0 22.2
Dwellings 20.9 10.2 -10.6 --30.6 19.5 -8.1
Other 10.5 20.6 - 3.5 16.9 28.9
Total gross fixed investment
(excluding ships) 66.1 11.2 1.4 19.3 19.1 6.9
1 Preliminary estimates.
2 Including public enterprises.
Sources: Annex Tables B and C and direct communication lo the OECD.
I It should be pointed out that the time pattern of these figures could be signifi¬
cantly influenced by starts and completions of individual large projects.
Greece
on building permits and show an absolute decline, exaggerate the change.
But high building costs and land prices, a less generous policy towards
housing credit, and perhaps a certain saturation of the new housing market
could all be expected to contribute to dampening activity in this field.
Parallel to the end of the housing boom the trend of machinery and equip¬
ment investment, although still strong, moderated. This was only partly
explicable by a drop in aircraft purchases. Public enterprise investment
was virtually flat but government investment was again stepped up sharply.
Table 2 SUPPLY AND USE OF RESOURCES
1969 1966 1967 1968 1969 1970,
Billion
Dr. I'ereenlage change in volume (1958 prices)
Private consumption 169.4 5.5 5.5 6.1 5.9 7.2
Government consumption 33.2 5.0 10.1 -3.1 9.9 5.5
Gross fixed investment 66.1 11.2 -1.4 19.3 19.1 6.5
Private 47.4 11.3 -6.7 25.2 19.6 4.7
Public2 18.7 11.0 11.8 7.0 17.8 12.4
Final domestic demand 268.8 6.6 4.5 7.9 9.2 7.0
Change in stockbuilding3 0.1 -4.0 1.0 -0.1 -0.5 0.6
Total domestic demand 268.9 2.3 5.4 7.8 8.7 7.6
Foreign balance, including factor income3 --1166..77 4.2 -0.4 -1.7 -1.6 -0.2
Exports 32.6 30.8 5.9 2.1 11.3 11.1
Imports 49.3 5.8 8.3 14.9 15.6
Gross national product at market prices 252.2 7.3 5.4 6.6 7.8 8.0
Gross domestic product at market prices 247.2 7.3 5.7 6.4 8.1
1 Preliminary estimates.
2 Including public enterprises.
3 The first column shows the absolute level of stockbuilding and the foreign balance in
1969; the remaining columns show changes in stockbuilding and in the foreign balance expressed
as a percentage ofGNP in the previous year.
NOTE The estimates ot fixed investment and the foreign balance exclude ships brought
under Greek flag.
Sources: Annex table A and directcommunication to the OECD.
The impact of last year's weaker trend in fixed investment on domestic
demand was reinforced by a slowdown in the growth of real government
consumption. The trend ofprivate consumption, on the other hand, improved
rather strongly. This contrasts with the development in other years since
the midsixties for which the official estimates show real private consumption
rising at a stable annual rate of some S'A-ô per cent. It seems that fluctua¬
tions in the rate of growth of disposable household incomes resulting
particularly from changing harvest conditions, but from a variety of other
causes as well had then been largely absorbed in the household saving
ratio. Last year, the link between disposable income and household saving
which a priori one would have thought would be rather weak, given the
OECD Economic Surveys
low average income level in Greece, apparently loosened. The change in
consumer saving habits largely explains the more buoyant trend of private
consumption. Still private consumption growth continued to fall short of
the 8 per cent annual rate foreseen in the 1968-1972 Plan (which was also
the average rate experienced during the first half of the sixties).
As in most Member countries, the statistical basis for estimating stock¬
building activity is weak in Greece. It is uncertain, therefore, whether
stockbuilding has in fact been as low as recent estimates indicate. Indeed,
stockbuilding accounted on average for about 2V2 per cent of GNP during
the first half of the sixties, whereas the rate dropped below 1 per cent in
the last three years despite very good harvests which must have required
some time to market2.
Exports recovered significantly in 1969, but with imports rising rapidly,
the external balance, on a national accounts basis, deteriorated as in the
preceding year. Thanks to the stronger trend of domestic demand, however,
real GNP growth rose from an estimated 6.6 per cent in 1968 to an estimated
7.8 per cent in 1969. Provisional official estimates suggest that the higher
rate was maintained last year. The foreign balance worsened much less than
earlier and this offset the impact of less buoyant domestic demand on the
rate of economic expansion.
Output and employment
Partial recovery from the setback in agricultural production brought
on by poor weather conditions in 1968 was mainly responsible for the eco¬
nomy's improved growth in 1969. The harvest was again excellent last year.
The two good crop years brought the performance of agriculture closer to
the targets of the 1968-1972 Plan ; nonetheless, growth in this sector during
the first three years of the Plan period (1.6 per cent a year on average) was
modest when compared with the 5.2 per cent foreseen. Nor is it clear that
the basic structural shifts in agricultural output have been proceeding at
the hoped for pace. Increases in the output of fodder grains and many non-
traditional crops (e.g., sugarbeets, fresh vegetables and fruits) have been
realized in recent years. But progress in increasing the output of livestock
products has fallen short of Plan expectations. The system of agricultural
price supports and subsidies, the main instrument for promoting production
shifts, was changed in 1967/1968 when, for a number of products, high
support prices and subsidies were replaced by minimum intervention prices
coupled with income supplements. The precise significance of the change is
difficult to assess, but it appears to have resulted in a gradual change in
producer income relationships that favoured a shift from wheat to fodder
grains. Direct income transfers would probably be even more effective in
producing the desired structural changes, but the Greek authorities are
2 TheGreekauthoritiesconsiderthatanunderestimationofthisdemandcomponent
would imply an overestimation of private consumption and vice versa. With the
uncertaintyattachingtothelawfiguresforstock accumulationin recentyears,thequestion
arises whether private consumption may not have been weaker than officially estimated.