These are iw4’s predictions for the Greek economy in 2013. Before we get into the details lets recap how our predictions for 2012 worked out.
We predicted a modest 3.9% reduction in GDP for 2012 on the thinking that taxes would not be increased. They were and the economy is forecast to shrink by over 7% in 2012
We predicted unemployment to be at 25.9% by the end of 2012. This actual figure looks to be 25.4%
We were anticipating many layoffs in government in 2012 as well as workers being put on gardening leave at a reduced wage. This did not happen. Predicted deficit 6% actual deficit 9.4%
We expected a big drop in the trade deficit for 2012 due to increasing taxes and shrinking GDP. Actual trade deficit for 2012 7.4%, predicted 6.8%.
We predicted falls in the early part of 2012 with rises toward the end of 2012 and prices being generally more stable in 2012. This is broadly what has happened.
Summary of 2012 Predictions
On the whole our predictions turned out to be over optimistic. The main reasons for the Greek economy under performing compared to our expectations was the Greek government’s decision not to lay off workers and not to put workers on gardening leave. We also did not anticipate tax increases for 2012 but taxes did increase noticeably namely the property tax.
2013 Economic Predictions for Greek Economy
So let’s get into 2013. One overriding theme of our predictions for 2013 is a collapse in the Greek economy, the following predictions outline what we believe this collapse will look like. We were over optimistic in our predictions for 2012, I hope for all people in Greece that our predictions for 2013 are unduly pessimistic.
At the time of writing there looks to be simply massive tax increase for 2013. The elimination of the tax-free limit and the general increase in the rate of income tax.
Benefits will be continue to be cut in 2013. While we support government cuts we believe cutting benefits should be the last thing to be cut as this is the fruit of the government’s work. Cutting benefits is akin to a car factory maintaining its capacity while cutting its production, it is completely counterproductive in the quest to cut costs.
We predict the Greek economy to shrink by over 10% in 2013
We see no reason why the unemployment rate will not increase in 2013. Due to government measures of the unemployment rate it is possible this figure could start to stabilise as people who have been unemployed for over a year stop being counted. Difficult to call for 2012 but we predict an unemployment rate of 29.8% for 2013.
Given the current governments resistance to cuts in the workforce and our forecast shrinking in GDP for 2013 we see the government deficit to be 12.1% for 2013
Due to the reducing GDP and the increasingly strict border controls we expect the Greek trade deficit to decline in value but due to the shrinking of the GDP its percentage of GDP could remain stable. i4w predictions for the 2013 Greek trade deficit is 7.1%.
We expect the Athens Stock Exchange to show strong resilience to the generally collapsing economy as outside investors continue to put their money in with the view that they may lose money in the short-term but make it back up in the long-term. Investors scared they will lose the opportunity to buy at the bottom of the market will prepared to pay a premium to get their foot in the door.
We expect extreme volatility in stock valuations during the first six months of 2013 with stability emerging towards the end of 2013. We expect the Athens Stock Exchange to fall in value by 2% in 2013.
Trends in Greece For 2013
The Greek central bank governor has come out with a prediction of a 4.5% drop in GDP for 2013. He is obviously privy to the strategies of the Greek banks. If Greek banks were to start lending again in 2013 then our drop of over 10% in GDP would be over the top. However we do not see how banks will start lending again in 2013 given the effects of the latest proposed tax increases are yet to be understood.
We expect the Greek government to continue its unintentional support of Golden Dawn actions inside the country. We also expect the tensions between Greeks and immigrants to continue to increase through 2013 due to the actions of the Greek government.
To Vima is quoting the Bank of Greece as saying the Greek government needs to improve tax collection and to attack tax evasion.
We expect new laws and initiatives to emerge during the middle of 2013 which will viciously attack Greek citizens who have unpaid taxes due to the state. The back log in the Greek courts mean it is not feasible to sort out the issue of unpaid taxes through the courts so we expect arbitrary procedures to be put in place which by-pass the legal system altogether. We expect the seizure of private assets in Greece by government agencies to start in earnest from the middle of 2013.
We are more pessimistic for 2013 than we were for 2012. This is due to the Greek government’s total resistance in the shrinking of the workforce. Tax increases are also going to be massive and will affect the poorest in Greek society the most by some margin. These two measures in our minds dooms the Greek economy to further huge losses in GDP and in a country without the power to print its own currency, that shrinking of GDP is even more meaningful.
We hope we are wrong in our predictions for 2013 and by some margin.