2024-07-27 06:31:20
After the double deficits… the “twin spaces”: Greece faces a severe problem not only with “investment gap” but also with the equivalent savings accountwhich is actually expanding as can be seen from the first quarter data.
“Investment gap” is defined as the difference in the participation of investments in the formation of the GDP recorded in Greece in relation to the EU average. And despite the efforts of recent years and the EU funds flowing into the country, the gap remains large, as Greece is barely at 14%, when Europe moves a little over 20%.
On the savings “front”, the problem seems to take on even greater dimensions. When in the E.U. household savings seem to have stabilized in recent years at 12%-13% of disposable income, in Greece it is negative and in fact yesterday’s data from ELSTAT show a “deep” negative rate of four times in the first quarter of 2024 compared to first quarter of 2023.
Her official details Hellenic Statistical Authority (ELSTAT) calculate the household savings rate – i.e. the ratio of gross savings to gross disposable income -8.1% for the period January – March 2024. This is four times higher than the -2.2% recorded by ELSTAT in the first quarter of 2023.
At a slow pace
Gross income continues to grow at a much lower rate than gross expenditure and this further exacerbates the problem, as in practice disposable income is squeezed and reduces the already narrow scope for saving, which in turn “hits” and investments, at a time when their increase is a major demand. It turns out that in “twin gaps” one strongly influences the other.
In the first quarter of 2024, the disposable income of the household and non-profit institutions serving households (NPO) sector increased by 1.1% compared to the corresponding quarter of the previous year, from €34.74 billion to 35.13 billion euros.
Primary incomes
The gross balance of primary incomes recorded a larger percentage increase (4.8%) but both current income taxes and social contributions rose by much higher rates (6.5% for taxes and 10.2% for contributions), with resulting in a significant reduction in the growth rate of gross disposable income.
In the same period, final consumption expenditure by households and non-profit institutions serving households increased by 6.9% compared to the corresponding quarter of the previous year, from €35.5 billion to €38.0 billion.
In absolute terms, they had an increase of 2.5 billion euros in expenses and only 390 million euros in income.
Why is the phenomenon of negative savings prolonged and intensified? Recently, the governor of the Bank of Greece, Giannis Stournaras, listed the main reasons that remain on the “table”:
The low (or negative) saving of households was mainly due to:
- to the high percentage of the shadow economy and tax evasion, which favors consumption rather than saving,
- in the insurance system, which, with the exception of the recent attempt to create a capitalization pillar, TEKA, for many years remained purely distributive and with a high replacement rate, which discouraged private savings,
- to the low interest rates on term deposits compared to the rest of Europe, which also discourage private saving, and
- in the lack of culture or even incentives for private insurance of the assets of individuals against natural disasters, with the result that Greece presents the highest corresponding insurance gap in the Eurozone.
The course of deposits
The data published yesterday by the Bank of Greece showed an increase in private sector deposits during the month of June by 3.83 billion euros compared to the previous month.
Particularly:
- Business deposits increased by 3.051 billion euros in June, compared to an increase of 577 million euros in the previous month.
- Household deposits increased by 775 million euros, compared to a decrease of 274 million euros in the previous month.
It is noted that the increase in deposits (even of households) should in no way be confused with the change in savings, as the reasons that may affect the balance of bank deposits are completely different and the way the size of the deposit is calculated is completely different. savings for all Greek households.
The course of the loans
There is also concern about the course of mortgage loans, since the negative sign for another month affects in turn investments in real estate, which, despite the increase, remain at low levels compared to pre-crisis levels.
In June 2024, the annual rate of change in total private sector financing accelerated to 6.1% from 4.8% in the previous month.
The monthly net flow of total financing to the private sector was positive by €3,313 million, compared to a positive net flow of €66 million in the previous month.
The monthly net flow of funding to businesses was positive by €3,158 million (vs. €105 million in May) and the annual rate of change stood at 10.3% from 8.3% in the previous month.
The monthly net flow of financing to individuals was positive by €88 million, but in housing loans the balance of financing amounted to €27.429 billion, down by €43 million, with a 12-month change of -2.9%