Growth built on shaky ground

Higher GDP fed by Greeks dipping into their savings, not just disposable income, which has been declining

Retail sales may be on the rise, contributing to an increase in gross domestic product, as Hellenic Statistical Authority (ELSTAT) secondquarter figures are expected to confirm later today, but analysts warn that Greeks are eating into their savings for this spending – which is not a good omen at all for the return of growth on a solid basis.

ELSTAT is today expected to announce a Q2 GDP growth rate con- siderably higher than the 0.4 percent posted in the first quarter. The Bank of Greece recently estimated it at 0.8 percent – on a yearly basis – while other analysts put it near 1 percent. Consumption is the driving force behind this growth.

“There is a recovery,” the chief economist of the Hellenic Federation of Enterprises (SEV), Michalis Masourakis, commented, estimating that the positive growth rate will grow in the coming months.

However, the rise observed in consumption is not necessarily the result of an increase in disposable incomes; on the contrary, SEV data show that in recent years Greeks have systematically been consuming more than their disposable income.

If one adds up salaries, pensions, payments to self-employed professionals, rents and other money transfers, and deducts taxes and social security contributions, the sum – i.e. disposable income – is lower than what is actually spent. In 2016 private consumption amounted to 10.6 billion euros more than disposable income, while in 2009 disposable income exceeded private consumption by 11.5 billion.

Economists say the phenomenon of negative savings started in 2013 and stood at a rate of 9.4 percent in 825.48 1.1825 2016, as Greeks started eating into their savings. Masourakis notes that in the last few years Greeks “have withdrawn deposits, sold off properties, opened up their safe deposit boxes and of course evaded taxation to a great extent.” Disposable income has been in a constant decline since 2010, with the exception of 2014 (when it rose 0.8 percent).