Greece's more competitive economy may turn to exports

Subject

Signs of resilience in the Greek economy.

Significance

The Greek government's protracted negotiations with its international lenders led to very high levels of economic uncertainty, which peaked in July 2015, with the introduction of capital controls. Since then, the progress made by the government towards implementing its agreement with the international lenders has largely removed fears that Greece might have to leave the euro-area, but capital controls and restricted liquidity in the banking sector continue to hamper economic activity. After slowly expanding through 2014 and the first half of 2015, the Greek economy slumped back into recession in the third quarter.

Impacts

• Reforms of the social security system required by the lenders are likely to prove the most politically contentious.
• A decreased contribution to GDP by the construction and service sectors will alter the composition of the Greek economy in the long run.
• The structural nature of unemployment will require an urgent reassessment of the labour force's training and educational needs.