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Saturday, January 11, 2014

Dismal Export Performance of Greek Economy

I regularly post statistics on the development of Greece's current account with all the details on exports, imports and services. The latest one is here.

One of the points which I have continually made is that the Greek export performance, though quite positive since the crisis, must still be considered as dismal. To demonstrate: 2013 exports will be only marginally higher than in 2008, the record year. 2013 exports may yet come out lower than the year before. That simply is not impressive when considering that Greece has become so much cheaper ('more competitive') since then. Also, the Euro, though appreciating of late, is still substantially lower against the USD than a few years ago.

This is even more surprising when considering that, as I read, the Greek productive capacity is running way below capacity. One wonders why that unused productive capacity cannot be placed in foreign markets.

Obviously, there is more to the issue of productive capacity. Longer-term, the Greek ecconomy's challenge is to increase its productive capacity so that it can make more of the products which Greeks consume (thereby reducing imports) and/or for export. But that takes time.

I would suggest that marketing & distribution, or the inadequacy thereof, are major reasons for the dismal export performance. It's not good enough to make, for example, agricultural products and sell them to a distributor. To export olive oil in bulk to Italy is nothing other than giving away the margins on the rest of the value-adding chain. Where possible, the focus should be on making products shelf-ready.

Finally, the 'promotion' part of the whole thing is key. I understand that Greece has a rather large export promotion agency with offices all over Greece but their focus doesn't seem to be on increasing exports. By the same token, an export strategy requires 'sales offices' abroad. Typically, they are commercial delegations residing in foreign embassies. They don't require much staff but they do require the best sales people!

I can only guess that these factors play a role in Greece's dismal export performance. Perhaps there are others. However, if Greece has been and is - as has been stated quite often - on an aggressive export strategy, that strategy can't be a very good one because, otherwise, the results would have to be much better.

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