Chart of the Week: Greece GDP per capita Chart of the Week: Greece GDP per capita 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.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992