How can the Greek economy continue its recovery? Investing in skills and technological change will be part of the solution, argues Cyril Muller.
Cyril Muller is the World Bank’s vice president for Europe and Central Asia.
Athens has been a source of steady good news in recent months. After eight years of economic crisis, Greece’s economy is growing again. In 2018, the economy expanded by an estimated 2% and the European Commission forecasts annual growth to accelerate to 2.3% in 2020, despite a worsening environment in Europe and beyond.
Unemployment has fallen from its crisis peak of 27.5% in 2013 to below 20% in 2018. In August 2018, Greece exited its last economic adjustment program, after implementing scores of structural reforms aimed at providing the basis for a sustained recovery.
As the immediate pressures of the crisis wane, policymakers are now considering what it takes to sustain this incipient recovery over the long term. Greece’s post-crisis recovery will unfold in a radically changing global and European economic context. Technological change – the fourth industrial revolution (commonly known as Industry 4.0), the digital transformation, and the data economy – is fundamentally altering the backdrop for Greece’s firms and workers.
It has already created new opportunities for Greece’s economy, despite the crisis: Witness the remarkable entrepreneurial success stories in Greece’s tech sector with global reach, such as the mobile platform Upstream, the taxi app Beat and the recruitment software Workable. Moreover, Greece’s agricultural sector boasts impressive examples of how technology and modern farming practices can jump-start agricultural productivity.
Successful tech ventures have benefited from Greek strengths, including a strong local talent pool, competitive wages and an established global network through the Greek diaspora. These success stories are not yet representative of a new Greek economy.
And there’s a downside: disruptive technologies risk widening economic and social divides between households, firms and regions within Greece. Why? Because while tech offers ever-richer opportunities for well-skilled workers and frontier firms, low-skilled workers and less productive firms increasingly risk falling behind.
A recent World Bank report argues that Europe’s famed “convergence machine”, which has for decades delivered some of the highest living standards and lowest levels of income inequality in the world, now needs an upgrade to continue to provide opportunities for all citizens in an era of disruptive technological change.
Greece needs to emphasize policies that combine better opportunities for firms and for people to take advantage of technological change. This should include a friendlier business and innovation environment to attract more domestic and foreign investors.
In the pre-crisis period, Greece’s economy already trailed its neighbours, as many Greek firms chose to remain small, focused on the domestic economy and engaged in low productivity activities. This has not changed.
Greece ranked 72 out of 190 in the 2019 Doing Business assessment (and last among 33 high-income OECD economies), suggesting there is ample room for improvements, especially in the ease of registering property, getting credit, enforcing contracts and resolving insolvency.
Significant improvements to the investment licensing system were already enacted during the crisis, and the development of a national cadaster, currently underway, will make it easier to obtain property.
It is critical to accelerate such improvements and to nurture the emerging innovation eco-system around the tech industry to signal to domestic and international investors that Greece is open for business and ready to export world-class products and services.
Better opportunities for people come through better skills and a labour market that provides flexibility and protection to workers. Greece is no exception to the worldwide trend of machines taking over routine and manual tasks previously conducted by humans.
To be resilient to labour market disruptions, Greece needs to invest in its people, to equip Greek workers with strong reading and mathematics, critical thinking, problem-solving and interpersonal skills.
While Greece has long had a strong track record in young people attending university, the country is lagging behind many of its European neighbours in ensuring that all of its children have strong foundational skills.
As many as 36% of Greek 15-year-olds performed below basic proficiency in mathematics in the 2015 Program for International Student Assessment (PISA) and thus unprepared to take advantage of technology.
Poverty plays a role: the equivalent figure for students from the poorer socio-economic strata was 60%, showing that Greece’s recent reforms to social welfare are a needed investment in the next generation.
The success of Greece’s economic recovery will depend on how well equipped domestic firms and people are to take advantage of the opportunities delivered by technological change, taking inspiration from current success stories to deliver Greece 4.0.