Greece adopted the euro as its new common currency in January 2002. The adoption of the euro provided Greece (formerly a high inflation risk country under the drachma) with access to competitive loan rates and also to low rates of the Eurobond market. This led to a dramatic increase in consumer spending, which has given a significant boost to economic growth.
Between 1997-2007 Greece averaged 4% GDP growth, almost twice the EU average. As with other European countries, the financial crisis and resulting slowdown of the real economy have taken their toll on Greece’s rate of growth, which slowed to 2.9% in 2008. Outside analysts like the International Monetary Fund (IMF) and the European Commission project Greece’s economy to shrink by as much as 1% or 2% of GDP in 2009. Key economic problems with which the government is currently contending include a burgeoning government deficit (5% of GDP in 2008) and increasing public debt (94.6% of GDP in 2008). The EU recently placed Greece under its Excessive Deficit Procedure and has asked Greece to bring its deficit back to the 3% EU ceiling by 2010.
Strong growth rates in recent years have contributed to a drop in unemployment (to 7.5% in 2008, down from 10.4% in 2004), although it is still significantly higher among women and people under 27. Unemployment is projected to rise to 9%-10% in 2009. Unfortunately, foreign direct investment (FDI) inflows to Greece have dropped, and efforts to revive them have been only partially successful. At the same time, Greek investment in Southeast Europe has increased, leading to a net FDI outflow in some years.
Greece has a predominately service economy, which (including tourism) accounts for over 73% of GDP. Almost 9% of the world’s merchant fleet is Greek-owned, making the Greek fleet the largest in the world. Other important sectors include food processing, tobacco, textiles, chemicals (including refineries), pharmaceuticals, cement, glass, telecommunication and transport equipment. Agricultural output has steadily decreased in importance over the last decade, accounting now for only 5% of total GDP. The EU is Greece’s major trading partner, with more than half of all Greek two-way trade being intra-EU. Greece runs a perennial merchandise trade deficit, and 2008 imports totaled $88 billion against exports of $25 billion. Tourism and shipping receipts together with EU transfers make up for much of this deficit.
Information by U.S. Department of State
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