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Deflation will continue this year too

16 April 2013 / 16:04:50  GRReporter
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If the government does not reduce the VAT rate on some of the major groups of goods, the deflation of the prices in supermarkets will continue to increase this year too. In 2012, the prices in supermarkets shrank by 2% due to the recession and the figure could reach 3% in the next 12 months. These are the forecasts of Jerome Lubere, chief executive officer of the supermarket chain Marinopoulous, who commented on the economic situation in Greece at an international forum on overcoming the economic stagnation.
 
"I've been in Greece for 12 years already but I have seen that more changes were made last year than in the first 11 years of my stay in the country," the businessman comments on the reforms that the Greek government has initiated within the context of economic restructuring. He stresses that the first changes that the government has introduced in the product market are in a positive direction and gives the example of cancelling the restrictions on the sale of baby milk, which since last year, can be sold not only in pharmacies but also in supermarkets. This has led to a reduction in the price of baby milk by 12%.

Lubere insists that the VAT rate should be reduced in order to relieve some of the burden on consumers. On the other hand, he believes that the Greek companies need to focus on expanding their presence in neighbouring countries, which will increase their production and create 10,000 new jobs in the short term.

Marinopoulous supermarkets are trying to stimulate consumption by various initiatives, including the introduction of a 10% discount for the 330,000 company employees in the shops of the chain. A social programme has been operating since last year to help the most vulnerable social strata. So far, the company has helped six thousand households providing them with essential goods, which supports its social profile in times of crisis.

Greek enterprises continue to struggle with the difficult financial situation, despite the inability of the state to repay its obligations to them. "The state still owes billions of euro to corporations that collaborate with the public sector," states the president of the Association of Pharmaceutical Companies in Greece Konstantinos Frouzis. He stresses that the problems of the Greek market are numerous, including a series of restrictions to real business and innovation, the heavy bureaucracy and especially the delayed payment of public sector obligations to suppliers.

"The obligations of hospitals should be united in an organization. They cannot be spread in dozens of places without transparent allocation and repayment," insists the businessman. He considers the electronic prescribing one of the most important legacies that the current government can leave for the future and encourages the completion of the electronic provision of public health services, which will make the procedures and the movement of funds transparent and clear, and will also increase the efficiency of services. Frouzis notes that the costs in the health sector remain the highest in the budget and that a series of obstacles in the market does not allow the prices of medicinal products to decline. "The pharmaceutical sector is one of the most important levers of economic development and it could lead to a direct increase in GDP in the coming years," said Frouzis.

The representative of McKinsey & Company, Teodoris Pepanides, states that compared to the period before the crisis, Greece has lost 30 billion euro in foreign direct investment. The collapse is mainly due to the lower demand in general, the decline in the demand in the real estate market and the freezing of construction activity. Greece’s GDP in 2012 was 194 billion euro. Under the plan of the International Monetary Fund, Greece's GDP should reach 210 billion euro in 2017. However, it is expected that public consumption will decline in subsequent years and that the intensified use of European Union funds under ESPA and the surge in exports  will not be able to offset the losses due to the long lasting recession.

"Greece has no choice but to attract direct private investment to give rise to economic growth," said Pepanides and explained that the only chance of accomplishing this is through the activation of the real economy.

He explains that he calls it "micro-economic activism." First, the state selects the sectors on which to focus and provide with concrete incentives for doing business. The government should analyze the difficulties in all sectors separately and draw up a plan to address them. Then, it should study the advantages and disadvantages of the specific industries. Once all the risks and unknowns are measured,  it should reform the regulatory framework in accordance with the needs of economic development.

Production of commercial goods, services, natural resources, trade and education are the strongest sectors as assessed by McKinsey. These sectors have their established basis in the economy of the country and can provide the fastest results in the increase of GDP. "If we do not make this country attractive for investments, the economy will remain weak." He stresses that the public sector must cease to act as a general manager, but as a host in order to enable Greece to become attractive to foreign direct investment again.

Tags: EconomyMarketsRecessionGreeceCrisis
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