A quick post on the topic of Greek imports/exports and their connection to domestic demand. The graph below shows the share of intra/extra-EU Greek imports to domestic demand as well as the share of intra-EU Greek exports to EU domestic demand (minus Greek demand) and Greek demand. An increasing share of imports and a declining share of exports (in terms of EU demand) would point to a loss of competitiveness. A stable share on the contrary would be in favor of the trade/income connection:
What is clear is that:
- Intra-EU imports were very stable at 12-13% share during 2003 – 2008.
- Intra-EU exports as a share of internal demand were also very stable during the same period.
- Intra-EU exports as a share of EU internal demand not only kept their share but also managed to increase it from 7.4% in 2002 to 10.6% in 2008 (scaled by 100). Since they remained stable as a share of Greek domestic demand this implies that Greece was growing faster than the rest of EU. Although it managed to increase its share of exports, its high growth contributed to exports not increasing as a share of domestic demand. Actually, during 2002-2008 Greek domestic demand either in constant or current prices increased at close to double speed than the EU figure. One has to acknowledge though that domestic inflation also increased faster, making Greece less competitive in CPI terms (which mainly hurts the services/tourism sector).
- Extra-EU imports was the only category showing an increase, at least after 2005 (from 8.5% in 2004 to 10.9% in 2008). This category though includes imports of oil and ships and is affected by the exchange rate.
The idea of a loss in competitiveness does not appear to be supported by the data. This is also evident if one checks Greek Real ULC relative to competitor groups (series OLCDO in Ameco). Real ULC are very stable after 2002 with a declining trend: