Greek Exports : Current Trends and Future Prospects

3. Greek export performance

Despite strong export growth towards the end of the 1990s,Greek goods exports continue to lag significantly behind imports. According to Bank of Greece data,during the particularly prosperous four-year period between 1998 and 2001,exports increased at a mean annual rate of 19.4%,reaching 8.8% of GDP by 2001. Nevertheless,over the same period,imports grew at a rate of 16.6%,reaching a staggering 25.3% of GDP by the end of the decade.Thus,despite the narrowing of the relative gap between exports and imports,the trade deficit continued to grow in absolute terms,a development which has largely persisted in subsequent years. Developments in the five-year period between 2001 and 2005 are presented in diagram 3.1,which tracks goods exports (total and non-oil) both in absolute and in relative terms. After a sizable contraction in 2002 (6.6% total and 4.1% for non-oil exports) exports have been growing steadily over the last few years,currently standing at 7.5% of GDP. Whereas the 2000-4 period also witnessed faster import growth rates,leading to a downward trend in of the export-import share from 36.9% in 2001 to 29.1% in 2004,this trend was finally reversed in 2005,as exports outstripped imports in terms of growth rates,raising the export-import share to 31.8%. On a side note,bear in mind that the more recent values are provisional,and may thus be revised upwards over the coming months.

(*) Provisional data Sources: National Statistical Service of Greece, Panhellenic Exporters Association, Export Research Centre (KEEM) In this context,one should point out that the data used in this section are drawn from the National Statistical Service of Greece (NSSG) and are not entirely compatible with the Bank of Greece figures. This discrepancy is principally caused by differences in data collection methods between the two sources. The Bank of Greece collects data from financial institutions and some major industrial units with substantial external transactions (e.g.refineries). Measuring only goods imports and exports,the NSSG collects data on both volume and quantity from two sources: (a) in the case of intra-EU trade,by processing the INTRASTAT forms completed when VAT is paid at the competent local tax authorities,and (b) in the case of extra-EU trade,by processing the special forms filled out when merchandise is cleared through customs offices. Tax evasion issues aside,this is a very time-consuming process,since a large portion of the forms (mainly INTRASTAT) contain errors that lead to their initial rejection. They are then re-submitted and only gradually added to the total as the data is revised,thus causing a discrepancy between provisional and final NSSG trade figures. The generation of on-line INTRASTAT form submission in 2003 has substantially reduced the number of errors and has increased the initial data coverage from 70% to an estimated 85%. Nevertheless,deviations still emerge between the two data sources,especially in the more recent observation periods. Moreover,the coverage of the two sources is different,since some transactions classified as exports by the Bank of Greece (e.g.ship repairs and supplies,`triangular` transactions etc.) are not included in NSSG data. Having said that,we should point out that in the case of exports,the mean discrepancy between Bank of Greece and NSSG data over the three-year period 2003-2005 is a mere 1.2% (arithmetic mean of annual percentage deviations).On the other hand,there is good reason to expect NSSG data reliability to decline as we examine more recent time periods. Despite their provisional nature for most recent years,NSSG data greater potential for further analysis and are conceptually closer to our notion to export firm activities. In what follows we shall use them to examine the principal markets for Greek exports,both in terms of countries and in terms of major product categories. Geographical export distribution The long-run trend in Greek exports over the last 15 years,i.e.after the collapse of the Soviet Union and the liberalization of Eastern European markets,has been one of increasing penetration in markets in the Central and Eastern Europe (CEE),especially the Balkans.This is reflected in the intertemporal rise of their share of Greek export activity,with CEE countries now absorbing roughly a quarter of the country’s exports,as opposed to 14.5% in 1995.As one would expect, this trend has been matched by a corresponding decline in the EU share from 60.6% in 1995 to 42% in 2001. In fact,the gradual realignment from EU-15 to Eastern-European and Balkan trade partners does not merely reflect the success of Greek export policy in the region; it also reflects the `crowding out of traditional Greek exports from EU-15 markets,as cheaper imports from new member states become available.The main Balkan countries where Greek products have penetrated local markets are Bulgaria,FYR or Macedonia,Romania and Albania,whilst the largest intra-EU exports markets for Greek products are those of Germany,Italy and the United Kingdom. What is more,the post-1995 customs union between the EU and Turkey has contributed to a gradual increase in Greco-Turkish commercial relations,registered as part of the `rest of OECD` group;Turkey currently absorbs roughly 5% of Greek annual exports. Turning our attention to developments over the last five years,as these are captured by the figures contained in table 3.1,we observe a partial and hesitant reversal in the aforementioned long-term trend,as the EU share is increasing ,thus simultaneously squeering out Central and Eastern Europe. This development is not taken to reflect long-term shifts in the country’s comparative advantage (and thus a permanent re-orientation of Greek export markets); its is most probably associated with the prolonged euro appreciation over the last few years,which has undermined price competitiveness outside the euro-zone.This interpretation is also consistent with the minor rise in exorts toward trade partners outside the euro-zone in 2005,when the euro depreciated midly. (*) Provisional data Sources: National Statistical Service of Greece, Panhellenic Exporters Association, Export Research Centre (KEEM) The latest geographical export distribution is depicted in diagram 3.2,where the dominance of EU-directed exports is confirmed (45.2%).Bear in mind that,for reasons of comparison,the EU definition employed in table 3.1 only covers the 14 `old` member-states,whilst the enlarged EU also comprises most Mediterranean,as well as several CEE countries. Thus,in 2004, the EU-24 absorbed 54.9% of Greek exports (E6,781.2 mil.),while the same figures in 2005 were 52.8% and E 7,377.4 mil.respectively.The second largest recipient of Greek exports are the Central and Eastern Europe countries (including the former USSR) with 19.8%,whilst Mediterranean countries and the rest of the OECD complete for third place,hovering around the 7% mark. Although the long-term trend has been one of growing market diversification,the last few years have witnessed increasing concentration in the top markets.Thus in 2004,78.0% of all exports were directed in the top 20 markets,and 61.8% was channeled to the top 10 markets,with the corresponding figures for 2001 standing at 77.7% and 58.0% respectively. Geographical diversification is important inasmuch as it is indicative of risk diversification (due to lower dependence on particular economies – national markets). Before turning our attention to the product composition of Greek exports,it’s worth pausing for a moment to examine the long-term evolution of exports directed towards the 10 new EU member-states. Accession countries may have been `crowding Greek exports out`of traditional EU-15 markets,but their strong growth rates and geographical proximity has also contributed to increased export absorption from Greece. Sources: National Statistical Service of Greece, Panhellenic Exporters Association, Export Research Centre (KEEM) Sources: National Statistical Service of Greece, Panhellenic Exporters Association, Export Research Centre (KEEM) Diagram 3.3 compares the value indices of total exports and exports absorbed by the 10 `accession` countries between 1990 and 2005.For the majority of years covered ,the chart indicates that exports to accession countries have growing faster than overall exports.Thus by 2005 ,exports to the 10 new member-states have increased almost 4.5 times from their 1990 value,while overall exports have not even doubled. The share of EU accession countries in total Greek exports has thus been increasing,currently standing at 7.6% as opposed to a meager 2.6% in 1990.Provisional 2005 data attribute a total of E1,059.6 million to accession countries,of which 67.7% is directed toward Cyprus,12.7% toward Poland and 5.5% toward the Czech Republic,whilst Hungary accounts for a further 5.3%.

Distribution of exports by product category

The current distribution of Greek exports by (single-digit) product category is plotted on diagram 3.4. A considerable portion of the country’s exports traditionally consists of agricultural products,including beverage and tobacco exports (which could also be taken to belong to the manufacturing sector).

Thus,the Export Research Centre (KEEM) of the Panhellenic Exporters Association noted in December 2002 that Greece was the EU-15 country with the greatest dependence upon agricultural products.

Despite a moderate decline over the last decade,the country’s agricultural export share remains much larger than in most western countries.

Some two thirds of these exports are absorbed by EU-15 (with which Greece actually has a deficit in the agricultural product balance),whilst there has also been a sizeable increase of such exports toward CEE countries.In 2004,agricultural exports suffered a considerable blow,failing below the 20% threshold for the first time ever.

Nevertheless,they promptly rebounded in 2005 (a percentage rise of 23.9%),aided by increases in food and livestock as well as animal or plant fats and oil exports.

The largest portion of exports in 2004 (61.6%) consisted of manufacturing products,which are said to have increased by 6.7% over the last year.

Manufacturing product share has been increasing almost steadily throughout the entire 1990s,and the Export Research Centre has calculated its increase at 34%,a figure that is unfortunately dwarfed by the corresponding global rate of increase of 94%.Manufacturing product exports towards the EU remain quite low,but a substantial portion of this increase has been directed towards CEE countries.

Hence one could argue that,broadly speaking,the product distribution of Greek exports has largely trailed the geographical re-orientation of the country’s exporting activities. For the most part of the 1990s,exports were increasing at low rates,since agricultural product exports were recending and manufactures were on the rise. Inasmuch as this can be interpreted as a shift to more diversified product categories and greater price and revenue stability,this development has been a positive one. Sources: National Statistical Service of Greece, Panhellenic Exporters Association, Export Research Centre (KEEM) (*) Provisional data Sources: National Statistical Service of Greece, Panhellenic Exporters Association, Export Research Centre (KEEM) Table 3.2 offers a more detailed picture of developments in individual product categories over the period 2001-2005. The absolute magnitudes,on which the calculated export shares are based,point to increases across the board,with the exception of the miscellaneous manufacturing products category (-6.5%),which includes the problematic textile and apparel industries. The largest increases are observed in the animal or plant fats and oils,a traditionally unstable category,exhibiting a 140.9% increase (following a 49.3% decrease 2004),as well as the notorious fuels category,which recorded a staggering upswing by 52.8%. Manufacturing expoprt growth (by 6.7% as mentioned above) was mainly fuelled by chemicals and related products,which continued their upward trend of the last 5 years (chemical exports have been growing by a mean annual rate of 17.8% since 2001). Last but not least,miscellaneous products and transactions without classification also recorded a substantial increase by 13.7% in 2005.

The most characteristic example is the protracted stagnation in clothing and footwear exports (where a large portion of the industry has migrated overseas) as opposed to the particularly dynamic categories of chemical products and machinery and transport equipment.

The latter category also includes telecoms equipment and office machinery and computers,both of which exhibit remarkable growth in recent years.

Unfortunately,a large portion of the impressive performance of the chemical product industry is due to the widerspread practice of `parallel`pharmaceutical exports from Greece.

Nevertheless,according to calculations by the Export Research Centre,adjusting for such exports would not alter the industry’s overall positive record:the 1990s would still stand out for their impressive export growth rate,which was greater than the corresponding international fogures.

A recent study monitoring the export performance of all Greek industries in the 1995-2002 period,singles out five large exporting industries (defined as having a share of total Greek exports larger than 5%) with historically strong export orientation (defined as the share of domestic production sold abroad):(a) Clothing and furs (40.0%),(b) Basic metals (36.6%),(c) Chemicals (35.4%),(d) Textiles (30.1%) and (e) Food products and beverages (11.5%).

The study then draws the questionable conclusion that these industries reflect current Greek comparative advantages.

Obviously,past performance is no guarantee for future prospects and the very notion of comparative advantage is dynamic and forward-looking rather than determined by historical values alone.

Thus,especially in the case of such categories as textiles and clothing, the complete removal of import quotas from China (in accordance with the WTO Agreement on Textiles and Clothing) as of January 1st,2005 is the culmination of a decade-long process of readjustment on world-wide scale,with European textiles and clothing industries being hit hard.

More appropriately,the same study also gives a list of industries whose current export share is small,but whose track record in the 1995-2002 period has demonstrated strong growth potential.

Such industries are (a) the manufacture of medical,precision and optical instruments (60.1%),(b) the manufacture of electric machinery and apparatus (41.6%),(c) the manufacture of machinery and equipment (36.5%),(d) the manufacture of plastic and rubber products (26.5%),(e) fisheries (16.9%) and (f) metallic products (15.5%).

While the available data allows us to focus on the export performance of aggregate industries,we must not forget that the ultimate exporting unit is the individual firm.

Although a company’s product mix plays an important role in its export orientation,there is considerable heterogeneity amongst companies in their exporting goals and strategies.

Alongside traditional export firms,a large number of Greek companies have made genuine efforts to increase their penetration in neighbouring markets.

Surveying a sample of Greek enterprises exporting to Central and Eastern European (CEE) countries,one researcher recently concluded that export success stories were usually associated with large-scale companies of substantial experience in international markets.

Interestingly enough,the same research did not suggest that the product category plays a significant role in distinguishing between successful and unsuccessful export endeavours.

It appears that a solemn commitment to a long-term export strategy,rather than erratic bids for immediate export gains,is a much safer avenue towards a sustainable presence in international markets.

Several of the issuesz raised in the above paragraphs inevitably touch upon the question of Greece’s export competitiveness, to which this next and final section is devoted.

Source: Athens Chamber of Commerce & Industry

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