Greece - Economy





The Greek economy suffers from a paucity of exploitable natural resources and a low level of industrial development relative to the rest of Western Europe. By 1992, it had fallen behind Portugal to become the poorest EC (now EU) member. However, there is an unrecorded underground economy whose size is estimated at 30–50% of the official one. In 2000, agriculture (with forestry and fishing) generated about 9% of the GDP but employed about 20% of the labor force. Agricultural exports include tobacco, cotton, wheat, raisins, currants, fresh fruits, tomato products, olive oil, and olives. In 2000, industry and construction accounted for about 22% of the GDP and 21% of the labor force. Wholesale and retail trade and other services provided some 70% of the GDP. Next to food processing, textile manufacturing used to be the most important industry, but chemicals and metals and machinery have outstripped it in recent years. Paper products has been a fast-growing industry since 1980. Greece has stimulated foreign investments in the development of its mineral resources by constitutionally providing guarantees for capital and profits. The government has encouraged tourism, which has developed into a major source of revenue. Greece continues to play a dominant role in the international shipping industry.

During the late 1950s and 1960s, the government took steps to reclaim land, develop new farms, increase credits and investments for agriculture, protect agricultural prices, and improve the agricultural product and utilize it to the best advantage; however, the country still depends on many imports to meet its food needs. Industrial output contributed substantially to the rapid increase in national income since 1960, and manufacturing and service industries were the fastest-growing sectors in the 1970s. In the 1980s, however, the economy retracted sharply because of the world recession and growth in real terms was sluggish. In the best year of the decade, 1988, GDP grew by 4.9%. In 1993, GDP dropped by 0.5%, but rebounded in 1995 by 2.0%. Inflation, which neared 20% in 1991, had been lowered to 8.1% in 1995, lower than the many EU countries that struggled mightily with inflation in the mid-1990s. As Greece pursued an economic austerity program aimed at meeting the criteria for European economic and monetary union (EMU), inflation continued to fall, reaching less than 4% at the end of 1998. Greece entered into the EMU in 2001.

As of 2002, the public deficit was well below the EU limit of 3% of GDP, the country's debt trend was being reduced (although at over 100% of GDP it remained the third-highest in the euro zone behind Belgium and Italy), and Greece was one of Europe's fastest growing economies in 2001 with GDP growth at 4.7%. Unemployment remained high at over 10%, and yet the country is in need of introducing social insurance reform. Greece has a large public sector, but is implementing privatization policies: sales of stakes in the state oil refining group and the state gas company were forthcoming in 2003. Businesses look to reform of the tax structure—the corporate tax rate was 35% in 2002. Public and private investment was strong in 2003, in preparation for the 2004 Olympic Games to be held in Athens.

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