Chart of the Week: Greece GDP per capita

Chart of the Week: Greece GDP per capita

Macro
Christopher Dembik

Head of Macroeconomic Research

Summary:  One-time bond-market pariah, Greece has recently joined the list of countries that are getting paid to borrow money in debt markets. A sale of almost half a billion euros of 13-week bills drew a yield of minus 0.02%. Contrary to what have been said here and there, this surprising turnaround is not the signal that the Greek crisis is over.


Actually, it essentially confirms that negative rates on European sovereign bonds are the new normal, partially explained by the ECB purchases on the secondary market and regulatory requirements that automatically increase the demand for sovereign bonds. We have definitively entered into japonisation of the bond market, and this situation is likely to last longer than most expected as QE infinity is taking place. The phenomenon of negative interest rate on Greek debt should not be exaggerated since it only concerns short-term debt. By comparison, Germany can borrow up to 30 years at negative rates and France up to 15 years.

In the case of Greece, it is mistaken to consider that negative rates are the reflection of the return of investor confidence. The Greek indicators are well on track, with strong economic growth expected to reach 1.8% this year, after 1.9% last year, and good resilience of the service and the manufacturing sectors, while other European countries are paying the price of the US-led trade war. Nevertheless, it would be misleading to believe the Greek crisis is over. There are numerous signs of weakness, such as the growing public debt that has increased from 178% of GDP in 2016 to 181% in 2019, social tensions related to high unemployment, a fragile industrial base that makes the economy too dependent on tourism revenues and, above all, a very weak banking sector. This is certainly the most worrying black spot. Until the banking sector recovers, access to credit is restricted which impedes investment. The level of non-performing loans is still very high, at 45% in the first quarter of 2019. This is a long-term issue that will take many more years to be solved by the Greek authorities

Finally, many doubts can be raised over the country’s ability to recover its pre-crisis level of wealth. Looking at GDP per capita, it was standing at 21,800 euros in 2007, the highest recorded level. Nowadays, it is about 24% below. In recent years, it has tended to stagnate. One can only be pessimistic about the outlook for the coming years given rising risks at the global scale that will inevitably affect the Greek economy.

Quarterly Outlook

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.