FTAlphaville had a nice article on the evolution of real GDP per capita for various countries in the world during the last 10 years. Although real GDP per capita can provide some nice insights on potential product dynamics I feel it mixes demographics with current production too much. Although every metric has its problems (some are influenced by the business cycle too much) I ‘ve decided to do a simple breakdown of real GDP evolution into GDP per hour worked (productivity per hour) and employment for a number of Euro countries:
Greece and Spain are one level above all other countries with an increase in GDP around 30% during 2000 – 2008. The rest of the periphery countries as well as Germany hover around 10%.
Real GDP can be decomposed in Real GDP per hour worked * hours worked per employee * employment. Hours worked showed a common downward trend for all countries so are left out.
Focusing on productivity per hour we can see that Greece had an increase close to 30%, much higher than any other country. Germany stands out as well while Italy stagnated during all the 2000s something that can explain its current problems with GDP growth.
Employment increased substantially in Spain (close to 30%) which was the main driver of GDP growth with Greece also achieving a satisfactory growth of 15%. Italy was close to 10% while Germany and Portugal stagnated.
One can also take a look at a few of the above indexes and their change during the Euro crisis:
Germany stands out as the only country that managed to achieve significant gains in both its productivity and employment during the 2008 – 2013. All of the periphery countries observed substantial losses in employment. In a few cases this fall translated into positive changes in productivity (due to a larger fall in hours worked than output) although Greece managed to experience large losses in both indexes. Italy continues to stand out as the country where productivity did not experience and significant change during almost 15 years.
Given Italy’s demographic dynamics its ability to achieve future high GDP growth rates will be quite difficult and cast a shadow on its ability to service and lower its already very high debt.