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Greek Bond Up! Greek Economy Down.

Date posted: January 31, 2020

Last Friday, the Fitch rating agency upgraded the Greek bond by one notch to BB with a positive outlook. I am totally fine with the upgrade to BB. Fitch can justify this rating by basically saying that the majority of the Greek bonds are in the hands of the ESM and EBU, so they are safe, and yes if you buy them somebody will pay you back when they will be matured.

However, this rating cannot in any case mirror the real state of the Greek economy. During the holiday period, small businesses saw the lowest gains in the past few months, while large businesses found themselves to have the same gains as last year. If you take a good look at some numbers will very easily understand that the BB rating is completely false and misleading. In addition, you can identify some worrying signs.

These are:

Unemployment: The number of registered unemployed increased in December, according to the official unemployment office’s data. Specifically, the total number of registered unemployed for December 2019 was 1,064,526, up from 1,018,503 in November 2019, recording an increase of 4.52%. Also, compared to December 2018, when the unemployed were 935,449, the increase is projected at 13.8%.

Industrial Production: The General Industrial Production Index for November 2019, compared to the corresponding index for November 2018, decreased by 8.1% compared to the 5.2% increase recorded in the corresponding comparison of 2018 with 2017. During the period January-November 2019, compared to the corresponding index of January-November 2018, it showed a marginal increase of 0.1%.

Turnover in Industry: The overall Turnover Index in Industry of November 2019, compared to the corresponding index of November 2018, decreased by 7.9% compared to the increase of 7.6% recorded in the comparison of 2018 with 2017. Also, the average General Index for the twelve months of December 2018 – November 2019, compared to the corresponding index of the twelve months of December 2017 – November 2018, decreased by 1.2%, compared to an increase of 9.4% compared to the corresponding previous 12 months.

Exports: Exports in November 2019 decreased by 11.4%, as they amounted to EUR 2,712.4 million, against EUR 3,060.3 million in the same month of 2018. Also in January-November 2019 Exports amounted to EUR 30,902.2 million versus EUR 30,879.0 million in the same period in 2018, up 0.1%.

Wholesale Trade: Wholesale Trade Turnover Index for Q3 2019, compared to Q3 2018, decreased by 3.0%, while it decreased 2% compared to Q2 2019, 6%.

Construction: Private building activity is also declining, as 1,832 building permits were issued in October 2019, corresponding to 390.0 thousand m2 of surface area and 1.685.4 thousand m3 volume, showing a 13.6% increase in the number of building permits, a 3.6% decrease in surface area and a 9.9% decrease in volume compared to the corresponding month of 2018. It should be noted that the volume that counts for construction is the volume of new construction.

Peter Charitopoulos


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