All indicators agree: the Greek economy is on the way to recovery, yet all optimism coming from this return to growth is undermined by a basic element which is still missing: investment. With the country’s unemployment still perched at 21 per cent (despite having fallen from 24 per cent), the need for investments becomes more evident every passing day. According to a Bloomberg media analysis, investment is the only thing that would drive unemployment below 20 per cent and push down social costs.
The report quotes economist Nicholas Magginas, a leading economist with the National Bank of Greece, who estimates that Greece will need investments to grow at an average rate of 8 per cent for the next few years: “You can’t have sustained growth without investment,” he says.
“So far the employment pickup has been in labour-intensive, low-skilled sectors like tourism, which don’t improve productivity. But that was the easy part and now it needs to be more capital-intensive.”
The Greek government has been trying to create confidence, advertising the country’s return to stability and hoping that this would lead to investment, but this has yet to happen – and the public debate on high-profile investment projects being stalled due to environmental or archaeological reasons, is not helpful. Despite signs of life becoming evident in almost all industries, from manufacturing, which hit a nine-year high last month to retail, which has seen sales growing while crisis-stricken consumers slowly return to spending, gross fixed capital formation was stagnant in 2016, and grew just 2.7 per cent in the first half of this year.