Introduction
Macroeconomic indicators are very crucial in the progress of a particular country. The crucial nature of the indicators emanates from their focus, which entails the country’s economy. Interest rates, gross domestic product (GDP), balance of payment, employment rates, and fiscal policies are among the key macroeconomic indicators that influence the performance of a given country.
Fundamentally, interest rates relate to the level of interest that the country imposes on its citizens as well as goods that investors and businesspeople import. Interest also encloses levies that other countries charge on imports from the respective country.
As such, interest rates play a momentous role in the economy of a country. On the other hand, gross domestic product is an indicator that concerns the purchasing power and buying abilities of citizens living in a given country. It is imperative to explain that poor purchasing power and low ownership of property demonstrates a low economic state of a nation.
Balance of payment represents management of debts and other forms of payment that a country receives from lenders. Furthermore, employment rates indicate the number of individuals employed directly, indirectly, or as self-employed in various public and private enterprises.
Fiscal and monetary policies are roles that the government and the central bank can undertake in an attempt to minimize the expenditure and maximize the level of returns. Therefore, the purpose of this report is to identify and analyze macroeconomic indicators and their impact on the economy of Greece.
Research Methodology
To effectively identify and analyze macroeconomic indicators and their impact on the economy of Greece, the report undertook a research and collected information using a range of primary and secondary sources. The research sampled 150 respondents out of which 50 were females and 100 comprised of male respondents.
In addition, the report used closed and open-ended questionnaires and interviews on the respondents. For efficient data collection and analysis, the questionnaires developed questions, which were simple, easy to understand, and answer. Moreover, the questions focused on the macroeconomic indicators and their effectiveness on the economy of Greece.
The respondents had the liberty to answer the questions according to their perspectives, and as such, the amount of data collected was substantial and realistic. Consequently, closed questionnaires had succinct questions that would eventually provide useful information concerning the report. It is important to explain that the respondents had the freedom to answer or decline. Therefore, the data collected is valid, credible, and free from any kind of coercion or undue influence.
Besides the use of primary sources of information such as questionnaires and interviews, the report also utilized secondary sources of information. Published reports, books, and periodicals comprised the secondary sources utilized by the report in collection of data concerning the impact of macroeconomic indicators on the economy of Greece.
The report sought secondary sources that had credible and up to date information concerning the subject in question, a factor that validates the credibility of the data collected. Thereafter, the information collected became a subject of serious scrutiny and analysis. Removal of irrelevant information and retention of relevant information followed.
By making sure that the retained information contained facts and practical information concerning Greece and its state of economy, the data collected became instrumental in the study of macroeconomic indicators and their impact on its economy.
Analysis Section 1
Unemployment and Inflation
Unemployment and inflation are among the macroeconomic indicators that have affected the economy of Greece. Apparently, unemployment represents the amount of under employed individuals or those, who are not in any form of active employment. In Greece, the rate of unemployment is high and the number of people, who are not in active employment, is significant.
According to Monastiriotis (2011), the rate of unemployment heightened in 2009 and peaked in 2013. The high level of unemployment in Greece implies that the number of dependent individuals in the country is high. The graph in figure 1 is very clear in demonstrating the high level of unemployment in Greece as opposed to other European countries (Kraatz, 2010).
As such, the country has to incur increased costs in an attempt to minimize the challenges experienced by its unemployed citizens. Moreover, since the rate of unemployment is high, the amount of employment related tax as well as value added tax that the state imposes on commodities is low.
Consequently, inflation affected the price of commodities, influenced the costs of production, as well as the costs of imports and exports. The implication of increased costs of imports and exports meant that investors and lenders became reluctant to lend money or invest in Greece.
According to the argument advanced by Petralias, Petros, and ProdromĂdis (2013), the recession that affected several parts of Europe in 2009 had pronounced impact on the economy of Greece and compounded its eventual crisis. It is fundamental to explain that inflation does not only affect the prices of commodities within a country, but also influence the rate of currency exchange on imported and exported products.
When inflation occurred in Greece, the costs of exports reduced, while the costs of imports increased at substantial rates. Since Greece imports products that are almost double its exports, inflation had tremendous effect on its economy.
Ways of Coping with Unemployment and Inflation
To minimize the impact that unemployment and inflation has on its economy, Greece should institute policies that encourage development of private enterprises, increase its exports, and strive to minimize imports.
By encouraging private enterprises and investments, the country will be in a better position to reduce the rate of unemployment. Principally, the private sector is one of the leading employers in several developing and developed countries, and therefore, by encouraging them, Greece undertakes a practical step, which reduces unemployment.
According to Kouretas (2009), besides enjoying direct employment from private enterprises, some of the citizen will be beneficiaries of indirect and self-employment because of the private enterprises. Suppliers, producers, and small-scale business people will be among the individuals employed indirectly by the enterprises.
Therefore, to cope with the challenge of unemployment, which is a microeconomic indicator, Greece has to institute and foster policies that promote and encourage development of private enterprises from foreign and domestic investors.
Furthermore, Greece has to ensure that its imports are minimal, whereas the exports are high. Some of the factors that help the country increase the amount of its exports include introduction of new products and expansion of the scale of present products. Currently, Greece relies on tourism, remittances from its citizens employed in other countries, and shipping services.
Therefore, to increase its level and cost accrued by exports, the country needs to institute policies that will encourage development and expansion of these ventures as well as trying to develop other initiatives that will accrue an additional income. On the other hand, Greece has to minimize the amount of imports.
Currently, the amount of imports in Greece doubles that of exports, a factor that initiates a deficit and imbalance in its economy. To minimize the level of imports, the country can encourage its citizens to develop products within the country and encourage investors to create outlets in its localities. The implication of the initiative is a reduced amount of costs incurred by the country.
Analysis Section 2
Fiscal and Monetary Policies, Advantages, and Disadvantages
Currently, Greece has devised fiscal and monetary policies that focus on reducing the influence that macroeconomic indicators have on its economy. The policies target the level of interest, investments, and the average spending of the government. According to Harari (2015), a range of fiscal and monetary policies emerged during the implementation of the 11 austerity packages, which took place in 2015.
Some of the policies that the country enacted and implemented included dismissing its employees, increasing taxes, and development of online census that led to revelation of various ghost workers and organizations in government payroll. A good example is evident when officers discovered a healthy authority, which was a ghost organization.
Other fiscal and monetary policies include creation of a police unit, which handles tax evaders, development of policies that protect investors, as well as reducing the time spent in acquisition of construction permits. While these fiscal and monetary policies advance various advantages, they also have a number of disadvantages that affect their effectiveness in minimizing the impact of macroeconomic indicators on the economy of Greece.
Some of the major advantages that the fiscal and monetary policies advance to the economy of Greece include reduced expenditure, increased tax, and reduced government spending. Policies such as online survey revealed ghost workers under the country’s payroll, and as such, reduced the amount spent in paying nonexistent companies.
Consequently, the policy that concerned increment of taxes from ship owners, companies, and employees led to a rise in the level of tax collected and in turn increased the amount of revenue present in the country. In addition, when the government developed a policy that minimized payment of pension to retirees and revised retirement age, the revenues spent became minimal.
Another policy that led to significant reduction in government spending and increased the revenues held by the state included revision of employment terms such as salaries, wages, and an eventual laying off of several employees in various companies. These saw an overall rise in the level of money present in the hands of the state and influenced its economy.
While these fiscal and monetary policies advanced several advantages, they also led to a range of disadvantages. The drawbacks include high rate of unemployment, low GDP, reduced investment, and high levels of dependency. In the process of increasing the amount of revenues and boosting its economy, the government of Greece increased interest rates on products, companies, and employees, dismissed a number of employees, and reduced pension schemes for retirees.
Increased interest rates on companies, products, and employees had an impact in the cost of production, prices of products, and wages. Apparently, the policies led to a high cost of living, high commodity prices, and reduced the willingness of investors to invest in the country.
It is fundamental to highlight that investors love countries that do not subject them to high interest rates and high production costs. Therefore, by undertaking the policies, the government of Greece discouraged investments from domestic and foreign investors.
Analysis Section 3
Effectiveness of Growth Reforms
From the findings complied by the report, growth reforms executed by Greece in the past five years have a close relationship with its fiscal and monetary policies. In effect, growth reforms executed by the country focused on improving the overall state of the economy and reducing the impact of macroeconomic indicators.
Some of the growth reforms undertaken by the country include increasing the rate of taxes on products, companies, and employees, introduction of investor protection policies, and reducing the period spent by individuals looking for construction permits. The reforms became effective during the early and late 2015, when the country in cooperation with other European states such as Germany implemented the austerity packages (Petralias, Petros & ProdromĂdis, 2013).
The packages entailed reforms that centered on aspects of interest, cost of employment, investments, and government spending. Chiefly, the focus of the reforms was significant as they introduced benefits on the economy and revenues held by the state.
While the proposed reforms appear as rewarding and productive, they do not protect the employees and other citizens because they lead to increased production costs and an eventual rise in the cost of commodities. The focus of these reforms challenges their effectiveness since they appear to be one-sided and biased towards the government’s side. Practically, growth reforms need to target the citizens of a given country in the quest to minimize the level of unemployment, inflation, and wage bill (Kouretas, 2009).
However, when these reforms focus on the government and advocate for increment of interest rates, dismissal of employees, and reduction of retiree pensions, the reforms became impractical and unrealistic. As a result, the growth reforms devised by Greece appear to have been the initiatives developed during the debt crisis. For successful mitigation of the challenges posed by macroeconomic indicators on its economy, Greece has to formulate policies that focus on its citizens.
The effectiveness of growth reforms is minimal since they advance several drawbacks in the economy of the country. Few reforms encourage investments, increase rates of interest, and increase the amount of revenues held by the government. Conversely, others lead to high rates of unemployment, discourage investment, and increase the level of dependency.
For instance, the investor protection bill encourages investors to invest in the country, whereas the interest rates imposed on companies, products, and employees reduce investor willingness to invest. In the assertion of Kraatz (2010), growth reforms developed by the government of Greece do not have a significant influence on its economy.
It is imperative for the government to institute policies and reforms that improve the amount of revenues held by the state, boost the economy, and cushion its citizens from risks such as unemployment.
Analysis Section 4
Balance of Payment and Debt Management
Greece is among the countries that make up the European Union; therefore, its balance of payment has an influence on the performance of the euro, a currency used by the union. Due to its inability to manage debts, a factor that initiated its debt crisis, the balance of payment in the country has reduced.
Moreover, the discrepancy orchestrated by inequality between imports and exports compounded the country’s inability to manage its debts as well as its balance of payment (International Monetary Fund, 2014).). From the findings, it is clear that the volatility of the euro has increased especially after the debt crisis in Europe and Greece.
Over the recent past, Greece’s ability to manage debts has been ineffective. Corruption, poor tax management policies, and inequality between imports and exports are among the factors that triggered the inability.
The country spends large sums of its revenues to import products from foreign countries, a factor that serves to increase the amount of foreign currencies purchased to service the imports. Moreover, the government of Greece loses billions of Euros in activities linked to tax evasion.
In the assertion of Kouretas (2009), the scale of black market in Greece is higher and doubles that of Germany. The implication of high scale of black market is the high tax related losses experienced by the government. Corruption, which is rampant in the country, has led to loss of revenues that would boost the economy of the country.
Instead of making due payments for their products and paying taxes, some individuals pay bribes and evade taxes. The recent reforms, fiscal, and monetary policies initiated by Greece are likely to yield positive results in boosting its debt management ability as well as its balance of payment.
Fundamentally, the losses incurred by Greece from tax evasion, corruption, and leakages are significant. These loses are among the factors that plunged the country into the debt crisis and high level of inflation. According to Harari (2015), Greece is among the leading countries in relation to corruption and poor tax collection systems.
Since leaders and tax officials take long to implement policies regarding tax exemptions and taxes imposed on products, the magnitude of losses incurred by the state is high. As a result, the country had to borrow loans and grants from countries such as Germany and organizations like the World Bank.
In the assertion of International Monetary Fund (2014), Greece falls among the highest borrowers and was among the first countries in the European Union to default in debt repayment to the World Bank.
It is important to explain that since Greece has challenges of corruption, slow systems utilized in implementation of trade and investment related policies, investors and lenders developed low confidence towards the country. By demonstrating low confidence towards Greece, the level of investment in the country reduced and crippled the rates of employment and tax.
Conclusion
Macroeconomic indicators have significant impact on the economy of a given country. The indicators have had a substantial impact on the economy of Greece, which recently suffered a debt crisis. While Greece has a number of exports, the amount of imports exceeds the exports.
Corruption, unemployment, and high levels of dependency have led to poor economic state of Greece and catalyzed its inability to manage debts and balance its payments. The study revealed that Greece has policies that do not address the situation successfully, and thus, it still needs to enact practical reforms that can minimize the challenges posed by macroeconomic indicators.
References
International Monetary Fund. (2014). Fiscal Monitor—Back to Work. Washington: Maryland Composition International.
Harari, D. (2015). Greek debt crisis: background and developments in 2015. 7114(13), 1-35.
Kouretas, G. (2009). The Greek Debt Crisis: Origins and Implications. Athens: Athens University of Economics and Business.
Kraatz, S. (2010). Employment and Social Affairs. Youth unemployment in Greece: Situation before the government change, 1(1), 1-10.
Monastiriotis, V. (2011). Austerity Measures in Crisis Countries – Results and Impact on Midterm Development. Intereconomics, 1(1), 4-32.
Petralias, A., Petros, S., & ProdromĂdis, P. (2013). Greece in Recession: Economic predictions, mispredictions and policy implications. Hellenic Observatory Papers on Greece and Southeast Europe, 1(75), 1-27.