Following the first annual report of the previous year (2019), this year’s (2020) report offers an up-to-date comprehensive analysis of the productivity and competitiveness developments of the Greek economy. In addition to the analysis of the patterns and drivers of productivity at the macro and sectoral level, an assessment of the impacts of the COVID-19 pandemic and of counter-measures to mitigate adverse effects is made. The effects of the macroeconomic shock of the pandemic are placed in the context of pre-existing conditions pertaining to the Greek economy, which kept its TFP far from the frontier of the European and world best-performing countries and led its labour productivity to diverge from the EA countries.
Among other factors, several of which are common and have contributed to the productivity slowdown in the advanced economies, the country’s productivity has been adversely affected by the declining capital intensity, the low performance in skills development and technological adoption, and the relatively high contribution to the economy of low-productivity sectors. The pandemic further contributes to lower investment, unemployment, and the deterioration of the budget balance, public debt and global trade linkages. Nevertheless, it is argued that this urgent situation may offer opportunities for the government to redesign its growth strategy and to attract and (re)allocate resources towards higher-productivity sectors, increasing physical and human capital intensity and diversification, expediting technological adoption and increasing the resilience to such global-scale (health, financial and environmental) risks.
The improvement of the overall competitiveness of the Greek economy, which is characterised by poor performance, involves the treatment of a wide range of critical indicators. At the national level, such indicators include the legal system, the land administration and the public sector management at both the central and local levels of government. Particularly in relation to sectoral competitiveness, it is suggested that the Greek manufacturing industry can improve its performance through reducing energy and transport costs, e.g., by adopting energy-efficient technologies and effective logistics practices, facilitating access to external finance and decreasing borrowing costs, boosting investments in human resources and (ICT and non-ICT) capital assets, and raising the R&D intensity and the share of production and exports of high-tech products.
Furthermore, two key thematic productivity challenges with considerable implications for the upgrading of the Greek economy to more efficient sectors are examined. First, the issue of the relatively low performance of the country in skills development, utilisation and matching is discussed. Holistic policy interventions and reforms are suggested with a focus on all levels of formal education and all types of learning to reinforce the link between the skills supplied by the education system and the skills required by firms. Second, the challenge of the adoption and use of new technologies by Greek firms, which lag behind the EU28 average in several ICT indicators, is discussed. Relevant public policies for the enhancement of human capital and technological infrastructure in businesses as well as flexible training, distance learning and mobility programmes to their personnel in ICT-related issues are proposed to mitigate some barriers to e-business/e-commerce and reduce digital divides.
Despite the temporary disturbances caused by the pandemic, some positive developments in structural reforms over a range of institutions and functions of the public and private sector are also discussed, such as those aiming at attracting investment and improving the business environment and employment conditions. The need for strengthening the reform efforts is stressed, particularly in relation to the liberalisation of network industries (energy, transport and communication), the protection of property rights, the establishment of the rule of law, and the closer connection between changes in wage costs and growth in productivity and competitiveness.
It can be concluded that the prospects of a fast economic recovery, as will be outlined by the country’s Recovery and Resilience Plan, and of a long-term sustainable growth to be achieved during the new programming period, are closely related to a comprehensive package of policy reforms and investments, whose interactions and timing of implementation are crucial to boost productivity and competitiveness. It is indicatively mentioned that, given the current structure of the economy, while investments in the public sector and tourism services can bring about the largest increase in GDP and employment, a long-term industrial policy programme is required to enhance productivity and competitiveness, support import substitution and enhance forward linkages in global value chains, in conjunction with the green and digital transformation process.