Greek goods exports found themselves in the middle of a “perfect storm” as they were hit simultaneously by (i) climate change, (ii) geopolitical turmoil and (iii) anemic international demand. However, the difficult times also highlighted their resilience, as they largely kept the shares they have gained in the international markets intact – thus creating a solid prospect for their gradual recovery during the year. These performances and estimates are analyzed in the new issue of the “Business Trends” series of studies by the National Bank’s Economic Analysis Division.
According to the same study, exports recorded losses of 9.4% in the last quarter (November 2023-January 2024, in deflated terms), continuing the downward trend of the previous quarter (-2.9%). Looking more closely at their performance, we find that almost half of the decline came from olive oil and cotton – two agricultural products that saw exports fall by 72% and 55%, respectively, in deflated terms, partly due to climate pressure. In particular, devastating floods in Thessaly affected almost ½ of the cotton production, while high temperatures weighed on the already low (due to the declining olive crop cycle) olive oil production, which ended up 55% below last year’s records (and 24% below the average term of the “low” olive growing periods of the last 25 years).
However, the exclusion of these two products mitigates but does not reverse the picture of the anemic performance of the rest of Greek exports, which recorded a drop of 5.1% in deflated terms in the quarter in question, as:
– The crisis in the Middle East (e.g. transit problems in the Suez Canal) makes it difficult (i) for Greek products to access the markets and (ii) for Greek companies in raw materials, while also affecting (iii) the transit role of country.
– Anemic demand conditions in Western Europe and the Balkans (which account for ⅔ of Greek exports) led to an 8% drop in Greek exports to the region in the last quarter. It is noted that the rest of the markets register mixed trends, with a cumulative performance of +1%.
In this environment, Greek exports remained in negative territory for two consecutive quarters (August 2023 – January 2024), with cumulative losses of around 9% of the rise achieved during the dynamic period 2020-2023:H1, where Greek products increased their share of European exports by ¼ (to 0.52% from 0.43% in 2019). However, a deeper look into the data shows that, despite the decline, Greek products continue to show resilience, as:
– The losses of the last six months were smaller than the average growth of the six months of the dynamic period (€0.6 billion against €1.0 billion).
– Greek products (excluding the perennially weak clothing sector) kept intact the increased share they achieved during the period in question.
Looking at export performance at the sector level, we notice that the picture is not uniform, as 3 distinct categories stand out:
– Food and wood (cumulatively covering 30% of exports) are characterized as resilient sectors, as they are the only positives in the last quarter (+4% and +13%, respectively), continuing the upward trend that preceded during the dynamic period 2020-2023H1 (+23% and +94%, respectively).
– Clothing is characterized as a weak sector (covering 3% of exports) which is under constant pressure throughout the reference period (2020-2023), while at the same time it recorded the sharpest drop in the last quarter (-38%). Under these conditions, the sector has lost 1/3 of its export power compared to 2019 (-€0.5 billion).
– The rest of the sectors (i.e., the other 2/3 of exports) came under comparatively less pressure in the last quarter (in the range of -1% to -8%) and thus, despite the cumulative pressure of the last half-year, managed to maintain a large part of profits of the previous period. Textiles stand out as a negative exception, which in the last six months of pressure lost 60% of the gains of the dynamic period.
Regarding the outlook for 2024, we estimate that exports will gradually accelerate, and despite the difficult start will approach the medium-term growth trend (+5%) by the end of the year, thus achieving an annual performance of 3%. This assessment is based on the improvement in the growth expectations of international trade (+2.6% in 2024) and the European economy (+0.9% in 2024 against +0.5% in 2023 in terms of GDP), combined with the gradual fading of the negative effects of last year’s low production in olive oil and cotton. Consistent with this assessment is the return of Greek exports to positive territory in February (+4%, excluding olive oil and cotton), as well as the upward trend of export orders for the month of March. However, 2024 remains a challenging year, with businesses still facing difficulties due to geopolitical turmoil in “our neighbourhood” and economic conditions in our key markets. Also, climate change remains a current threat, and as 2023 has shown, it can have a pivotal role in the evolution of exports.
