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"As the graph below shows despite the turmoil in Greece tourism made a strong start to the year with arrivals at accommodation picking up (both in terms of residents and non-residents) and growing at over 10% compared to the same period last year." This shoe that people are more willing to spend more on tourism and also boosting it's economy by spending more.

Tourism boost the demand for goods and services, it would lead to an increase in the consumption level and which allows the market to have more activity which eventually lead to an increase in the GDP level.

Tourism would lead to an increase in the employment opportunity for the local population as there are more tourist attraction which needs people to provide services. When people are employed, their spending capacity increases which can cause an increase in the demand for goods and services which in return creates more supply under Keynesian Model.

Expenditure approach --> GDP = Personal Consumption + Investment + Government expenditure of good and gross consumption + Net Exports (Exports - Imports)

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Being in a financial and debt crisis, there was a significant collapse in Greece’s imports. This means that the GDP of Greece grew because from the expenditure approach, GDP = Personal Consumption Expenditure + Gross Private Domestic Investment + Government Expenditure on Goods and Services + ( Net Exports – Net Imports ). Hence if the imports fall, there would be a rise to the GDP.

There was also a boost in consumption. "people made purchases they had put off previously while the latter boosted it due to fears that their cash would be locked up in banks (as it eventually was) or that it would be significantly devalued in a Grexit." This shows that there were much more purchases made from the people which made the personal consumption expenditure to increase and hence in creasing GDP as GDP = Personal Consumption Expenditure + Gross Private Domestic Investment + Government Expenditure on Goods and Services + ( Net Exports – Net Imports ).

Another reason is also because Greece is facing deflation. The real gdp increased by 0.8% but nominal gdp fell by 0.7% as said in the article. Since there is deflation, prices of Greece's good and services are decreasing, hence more people are purchasing more which helped boost the personal consumption expenditure.

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Over the course of this year, Greece’s GDP has grown by 0.8% which no one had expected it, as said in the article. Why did its GDP grow this year despite its debt and financial crisis? The expected GDP of Greece was a negative 0.5% which meant that people expected the country to be in recession. GDP reflects the product of a nation, and is the most widely reported measure throughout the world of a nation’s economic performance or the health of the economy. In this case, since Greece’s GDP grew by 0.8, it means that its economic growth is positive because the real GDP of this year is higher that the real GDP of last year. Hence the positive economic growth means that Greece’s economy is growing and that more goods and services are being produced in the country.

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What Lies Behind That Astonishing Greek GDP Figure?

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What Lies Behind That Astonishing Greek GDP Figure?

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No-one saw this coming. And I mean no-one. Real Greek GDP grew by 0.8% in the second quarter of this year (against expectations of -0.5%) catching most Greece watchers (myself very much included) by surprise. So let us try to regain a bit of credibility by looking behind the numbers at what might have been driving such a sharp jump in Greek GDP at a time when the economy is widely thought to have been in a rapid decline.

The first caveat is that these are flash estimates and preliminary figures and may not include some of the worst decline towards the end of Q2 as the negotiations floundered and capital outflows picked up. Nevertheless there are a number of factors which could have boosted GDP, though we won't be sure until the final figures are released.
Collapsed imports
One potential explanation which has been put forward is a significant collapse in imports which would have relatively boosted Greece's current account and therefore boosted GDP growth. However, the data available does not support this view as far as I can see. As the chart below shows, monthly imports in Greece remained relatively steady and there was no huge shift in much of Q2 (although the data does not cover June). There also isn't any big shift in the trade balance. Of course, there could be movements in the other parts of the current account, namely the income flows but this does not relate to the imports argument. In any case such flows would have been moving in the wrong direction as money flowed out of the country.
Significant deflation
It is worth noting that while real GDP jumped by 0.8%, nominal GDP fell by 0.7%. Clearly Greece is in the midst of significant deflation, but once this impact is stripped out it is clear real GDP has still increased. The level of deflation in Q2 in Greece was also not particularly different from previous quarters. The nominal fall remains important of course as it means Greece's debt to GDP continues to rise and looks worse.
Boost in consumption
Another potential explanation is that there was jump in consumption and domestic demand in Greece. This was down to the fact that the situation calmed down initially after the bailout extension at the end of February and then deteriorated again due to fears of capital controls. The first phenomenon boosted consumption as people made purchases they had put off previously while the latter boosted it due to fears that their cash would be locked up in banks (as it eventually was) or that it would be significantly devalued in a Grexit. We can see some anecdotal evidence on this through indicators such as passenger car registrations. As the chart below shows (qith Q2 in red), these increased substantially in April, May and June this year, highlighting people were purchasing cars likely to put money into solid assets amid fears of capital controls and Grexit. If this phenomenon was spread to other similar assets (bigger, durable goods) then a boost to consumption and domestic demand could be expected. This phenomenon has been observed in crises in Russia and Cyprus recently.

Tourism boost

There are some tentative signs and reports of tourism pick up during the second quarter of the year as well. As the graph below shows despite the turmoil in Greece tourism made a strong start to the year with arrivals at accommodation picking up (both in terms of residents and non-residents) and growing at over 10% compared to the same period last year.

Generally, it's worth remembering that the data does not capture the majority of the downturn in negotiations, the increased prospect of Grexit and the capital controls which took place mainly at the very end of June and start of July. As such Q2 could have seen a confluence of a number of factors in particular positive tourist and consumption trends cited above, but also the more general fact that it fell in between uncertainty at the turn and start of the year and uncertainty in July. A relative period of calm for the economy between tense negotiations and operating from a low base might have helped produced the surprising growth.
What does this tell us?
Not much to be honest. I'd be cautious about drawing any serious conclusions from this single piece of data, which as noted above could still be revised substantially. Furthermore, while the factors cited above might play a role it remains unclear since we don't have the granular data to actually determine what caused real GDP growth.

It does raise some interesting questions though, not least how this fits with the EU/IMF/ECB forecast included in the draft bailout agreement of a 2.3% economic contraction in Greece this year. Surely, they must have had a good idea about what Q2 would be when making this estimate since it was only released a few days ago and they have full access to all Greek statistics. This suggests that the contraction in the second half of the year in Greece and in particular in July will be significant.

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What Lies Behind That Astonishing Greek GDP Figure?

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No-one saw this coming. And I mean no-one. Real Greek GDP grew by 0.8% in the second quarter of this year (against expectations of -0.5%) catching most Greece watchers (myself very much included) by surprise. So let us try to regain a bit of credibility by looking behind the numbers [...]

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Greek deflation rises in Sept., prices fall for 31st straight month

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Greek deflation rises in Sept., prices fall for 31st straight month

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ATHENS, Oct 9 (Reuters) - Greece's EU-harmonised deflation rate rose in September as prices fell by 0.8 percent compared to a drop of 0.4 percent in August, data from the country's statistics service showed on Friday.

The headline consumer price index fell by 1.7 percent year-on-year in September, with the annual pace of deflation picking up from the previous month. It was the 31st consecutive monthly fall in prices.

Greek consumer prices fell by an average of 1.4 percent in 2014 compared to a year earlier. Greek government has projected the fall will average 0.5 percent this year, while prices will rise by 1.3 percent next year.

For years an inflation outlier in the euro zone, Greece has been in deflation mode for the last 31 months as wage and pension cuts and a protracted recession took a heavy toll on Greece households' income.

Deflation in Greece hit its highest level in November 2013, when consumer prices registered a 2.9 percent year-on-year decline.

Prices in the euro zone fell year-on-year in September for the first time in six months, highlighting the persistent risk of outright deflation amid a slump in commodities price. Consumer prices in the 19 countries sharing the euro fell 0.1 percent last month after a 0.1 percent rise in August. **************************************************************** KEY FIGURES SEPT. AUGUST JULY JUNE MAY APRIL MARCH CPI y/y -1.7 -1.5 -2.2 -2.2 -2.1 -2.1 -2.1 EU-harmonised -0.8 -0.4 -1.3 -1.1 -1.4 -1.8 -1.9 -------------------------------- source: ELSTAT (Reporting by Angeliki Koutantou; Editing by Karolina Tagaris)

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Greek deflation rises in Sept., prices fall for 31st straight month

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ATHENS, Oct 9 (Reuters) - Greece's EU-harmonised deflation rate rose in September as prices fell by 0.8 percent compared to a drop of 0.4 percent in August, data from the country's statistics service showed on Friday. The headline consumer price index fell by 1.7 percent year-on-year in September, with the annual pace of deflation picking up from the previous month.

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Expenditure Approach ---> Public spending:

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Expenditure Approach ---> Public spending:

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Public spending "fell by 12.3% even before the new austerity measures the prime minister Alexis Tsipras has been forced to pass to win the support of his creditors for talks on a new bailout", this might be due to the changes in consumers' confidence in the economy as the consumers are experiencing recession. When there is a decrease in public spending, the GDP would also decrease, ceteris paribus, when using the expenditure approach.

Over all there would be a slower economic growth and the economy would be poorer. Even when there are more goods and services produce, the public would not spend a lot on unnecessary goods and services as they would be saving up for rainy days.

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Using the income approach to calculate GDP, when there is a decrease in indirect business tax ceteris paribus there would be a decrease in the GDP. In this case, "tax revenues were 8.5% lower in the first six months of 2015 than the same period a year earlier", this is due to tax evasion by the richer Greek in Greece who do not want to pay the debts of their mortgage. In recessions, tax revenues fall because of narrower base - and possibly because of tax rate cuts made by the government in name of stimulating the economy. If the tax revenue has not been covering the public expenditure, the burden of the public deficit would acumulated leading to the public debt.

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Greece's tax revenues collapse as debt crisis continues

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Greece's tax revenues collapse as debt crisis continues

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Fresh evidence of the dramatic impact of the Greek debt crisis on the health of the country's finances has emerged, with official figures showing tax revenues collapsing.

As talks continued over a proposed €86bn third bailout of the stricken state, the Greek treasury said tax revenues were 8.5% lower in the first six months of 2015 than the same period a year earlier. The bank shutdown that brought much economic activity to a halt began on 28 June.

Public spending fell even more dramatically, by 12.3%, even before the new austerity measures the prime minister Alexis Tsipras has been forced to pass to win the support of his creditors for talks on a new bailout.

Greece is due to make a €3.2bn repayment to the European Central Bank on 20 August.

Talks with the quartet of creditors, which includes the ECB, the International Monetary Fund, the European commission and Europe's bailout fund, the European stability mechanism, are continuing, and Tsipras has suggested they are "in the final stretch".

However, it remains unclear whether the prime minister, who was only able to pass the latest package of austerity measures with the help of opposition MPs, will be able to win the backing of his radical Syriza party for new reforms, at a special conference due to be held next month.

The IMF has made clear that it will refuse to commit any new funds until Greece has signed up to a new economic reform programme, and eurozone countries have made a concrete offer to write off part of the country's debt burden.

Sweden's representative on the 24-member IMF board, Thomas Östros, said there was strong support for a new Greek rescue, "but it will take time".

He told Swedish daily Dagens Nyheter: "There is going to be a discussion during the summer and autumn and then the board will make a decision during the autumn."

He also noted that Greece must adopt wide-ranging reforms first. "They have an inefficient public sector, corruption is a relatively big problem and the pension system is more expensive than other countries."

Despite the grim news on the public finances, Greek stock markets bounced back yesterday, after three straight days of decline, with the main Athens index closing up 3.65%.

In a separate piece of more optimistic news, official figures showed that the unemployment rate has fallen to its lowest level in three years - though it remains at a historic high of 25%.
Topics

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Greece's tax revenues collapse as debt crisis continues

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Fresh evidence of the dramatic impact of the Greek debt crisis on the health of the country's finances has emerged, with official figures showing tax revenues collapsing. As talks continued over a proposed €86bn third bailout of the stricken state, the Greek treasury said tax revenues were 8.5% lower in the first six months of 2015 than the same period a year earlier.

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CPI is a measure of the overall consumer prices in the economy that are supposed to be representative of average consumer items. If they go down from one year to the next, “The headline consumer price index fell by 1.7 percent year-on-year in September." and "Greek consumer prices fell by an average of 1.4 percent in 2014 compared to a year earlier. "

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“Some of the people who are leaving include recent graduates like 23-year-old Maria, who just graduated from Panteion University of Social and Political Sciences. Right now she is a waitress in a coffee shop,” This clearly shows that there is a seriously underemployment occurring in the country, as Maria is working for a job that is way below her level of skills and qualifications. The amount of money she is earning is way below what she is expected to earn. This may cause people to lost faith and confidence in their home country as well.

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The unemployment situation is very serious in Greece. This can be seen in “with 25 percent of the people in Greece now out of work.” This high unemployment rate can be due to many reasons. One of the main reasons why this is happening in Greece can be due to job losers. Since there is a downturn in the country’s economy, businesses of companies and factories are falling, which will cause people to be retrenched. This is because lesser output is needed to be produced, since people’s demand are much lower during the period of recession.

“When you look at the youth unemployment, it is well above 50 percent,” with the data shown that more than 50% of the people unemployed are youths, I guess they can be mainly fresh graduates, this type of unemployment is known as frictional unemployment. Although it can be short-lived in some cases, but due to the little amount of job vacancies available and the large number of people seeking for jobs in the country. This can bring many serious problems to the individuals.  Personally, the main problem for those youths will be the loss of their source of income. They are unable to support themselves and their families, and this can in turn leads to possibility of depression. Which can be very serious to each individuals, as the health of the person are being affected.
Another type of unemployment the country is facing is cyclical unemployment. This types of unemployment fluctuates with the business cycle. There will be a greater increase of unemployment during the period of contractions in the economy. Since Greece is facing financial crisis, the unemployment rate of the country should be high, “with 25 percent of the people in Greece now out of work.” “Current Greece’s population as dated on 30/11/2015 is 11,128,815, 25% out of the total population means there are 2,782,203 of the people in the country are currently unemployed.”This will leads to a serious problem in the country. With so many people unemployed, there is a decline in the aggregate output, as the aggregate demand decrease follow by sales.
“salaries are decreasing” this cause the nominal income of the citizens to decease, as the actual number of dollars received over a period of time decreases. This erodes away the purchasing power for each citizen and leads to a fall in the level of consumption. “prices of services and food have substantially increased because of taxes. There have been a lot of capital controls placed on the banks” This will definitely cause people’s standard of living to decrease, as they are not able to support themselves.

This high levels of unemployment rate and the increases in the prices of food and services can be costly not only to the individuals and families, but also to the economy as a whole. Social unrest can be arise in the country when people seeking for jobs become so desperately. Arguments and quarrels may arise in families and results in instability of families.

In this case, the government needs to implement policies and measures in order for the economy to recover from recession which includes boosting the confidence of the people and business in the country. This can be done by increases the government’s spending and decreases taxes. However, Greece’s government still continue to increase their taxes. This may be because of the huge debts the country is currently facing. Although this can further worsen the condition of Greece, but the country does not have enough money to help.

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The economy in Greece is under financial crisis for many years. This general slowdown of the economic activities had slowly led to contraction in the country. This is shown in “The years-long financial crisis in Greece has now led to history to once again repeat itself”. With this downturn in the economy, resources such as human beings are been wasted. This results in an increase of the unemployment rate in Greece. This can be seen in “There are so many Greeks settling in America and other countries because the financial crisis in Greece has led to high unemployment numbers,” With this high rate of unemployment, there will be lesser productivity and cause the loss of output in the entire country. Consumers and citizens will also slowly loss confidence in their home country as they are unable to obtain a job for a long period of time. Thus, with a thinking of searching for better lives and improvement on their standard of living, more and more Greeks are moving out of their home country.

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Economy in Greece experienced deflation. This can be seen in "Oct 9 Greece's EU-harmonized deflation rate rose in September as prices fell by 0.8 percent compared to a drop of 0.4 percent in August." and "Greece has been in deflation mode for the last 31 months."

Deflation is not absolutely bad, but often periods of deflation would lead to economic stagnation and periods of high unemployment. This is because deflation can discourage people's spending as things will be cheaper in the future. People will tend to buy less now, since there is a chance to get the same thing at a cheaper price in the future. Deflation can also increase real debt burdens – reducing the spending power of firms and consumers.

When deflation occurs, prices fall. It seems to be a good thing for consumers. But in terms of country's economy, concerns about deflation traps and downward spirals abound, it might lead to a vicious circle. Consumers know prices are falling, they spend less or even stop making purchases, causing prices to fall even further. Firms which are price takers are forced to lower the prices in order to retain their customers. When firms are not earning enough, which means paying lesser taxes to the government, thus income for government decreases as well. Huge debts in Greece will be harder to pay off.

Furthermore, "Greece has been in deflation mode for the last 31 months as wage and pension cuts and a protracted recession took a heavy toll on Greece households' income." with a decrease in nominal income. The actual amount of money they are earning also decreases at the same time. This will not cause the people to buy more even the prices of goods and services decrease due to deflation.

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Greek Financial Crisis Leads to Young People Moving Abroad

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Greek Financial Crisis Leads to Young People Moving Abroad

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Going back in time for a minute, you might not know that between 1946 and 1982 there were about 211,000 Greeks who ended up coming to America in search for jobs. The years-long financial crisis in Greece has now led to history to once again repeat itself as Greeks are moving out of the country and deciding to take their dreams to America and other prosperous countries.

There are so many Greeks settling in America and other countries because the financial crisis in Greece has led to high unemployment numbers, with 25 percent of the people in Greece now out of work. When you look at the youth unemployment, it is well above 50 percent, and salaries are decreasing as prices of services and food have substantially increased because of taxes. There have been a lot of capital controls placed on the banks in Greece, which was due to the international bailout deal with the lenders over in Europe. It is because of the skyrocketing unemployment numbers that people are fleeing out of Greece, both young and old people, in search for work in other countries.

While some have chosen to come to America, a lot of Greeks now are moving to Germany, as Germany is the number one place for Greeks to move to due to the financial crisis. Northern Ireland, Dubai, Belfast, and the United Arab Emirates have also become some hot countries for people looking to leave Greece and make a better life for themselves. Some of the people who are leaving include recent graduates like 23-year-old Maria, who just graduated from Panteion University of Social and Political Sciences. Right now she is a waitress in a coffee shop, and she is wanting to leave and move to Germany, because Germany, according to her, is one of the most developed countries in the world. Maria also knows the language and has even lived in Berlin before, although it was brief.

Greeks like Maria do have a few worries though to deal with, such as fearing that as an immigrant you become a victim to labor exploitation. Even with the possibilities of being exploited in countries like Germany, a lot of people within Greece believe they will end up being treated a thousand times better than they are treated in their own country of Greece. The Greek financial crisis has made the country even more strict, with the people feeling that the mobsters are running the country, and these guys just serve the elite people and not the regular people in their area.

A really cool thing about leaving Greece right now is that since Greece is part of the European Union, the people of Greece can work and live in other European Union countries without needing to apply for work permits or apply for a residency. Greeks who move to other countries in the European Union also will get social security benefits and health care, as they are entitled to that as well. In part, that is why so many Greeks are leaving Greece at a time of high unemployment and high financial crisis, and instead of all moving to America, are choosing to go to Germany and other countries where they do not have to apply to work or live there, and will still get their benefits as they would if they were still in Greece.

While of course, not everyone will find the life they expect when they leave Greece and the financial crisis behind for a better life, but other countries often do have it better. A lot of people in Greece do like how the German unemployment services work, as it helps job-seekers find positions that suit their skills, and applicants do get help to secure a job. The only promise that the job-seeker has to make is that they will attend the scheduled interviews, so it is a win-win for the person needing work and the unemployment services department. For people in Greece, the only hope is to leave the country and then find a new life somewhere else, with hopes that possibly returning one day will lead them to a better life.

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Greek Financial Crisis Leads to Young People Moving Abroad - Gazette Review

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Going back in time for a minute, you might not know that between 1946 and 1982 there were about 211,000 Greeks who ended up coming to America in search for jobs. The years-long financial crisis in Greece has now led to history to once again repeat itself as Greeks are moving out of the country ...