The effect of selected international developments on the Greek economy

We use a computable general equilibrium (CGE) model, based on the GTAP framework, to reveal how certain linkages and interactions affect Greece and neighboring countries, in a global context. In particular, the economy-wide effects on the Greek economy of a) China’s economic growth, b) Turkey’s economic growth, and c) the import tariff removals concomitant to the recent EU accession of Romania and Bulgaria, have been studied. Our analysis is based on aggregated data and parameters derived from the GTAP v6 database. The base year is 2001. We aggregated the 57 GTAP industries into 32 industries, 29 of which represent merchandise trade sectors. The analysis comprises five primary factors: land, unskilled labor, skilled labor, natural resources, and capital. Our findings suggest that China’s natural resources’ factor growth yields a positive impact on Greece, whereas growth in China’s capital, skilled and unskilled labor factors yields negative impacts to the Greek economy (although the overall sum is positive). Similar impact is manifested in the economies of South-European countries (with positive overall sum) and Bulgaria, Turkey and Albania (with negative overall sum for each of these countries). France, Germany, Rest of Europe, NAFTA, and Rest of Asia experience positive impacts only (with the exception of China’s natural resources factor growth on the UK economy and of China’s land factor growth on the NAFTA economies). Regarding specific Greek sectors, the Greek economy declines in 9 sectors, although 22 Greek sectors expand. Regarding Turkey, its economic growth has a positive impact on Greece, most of the European countries, and the rest of the world, with the exception of North East Asia and South Asia regions, which experience a negative impact. Overall, 18 Greek sectors expand. The economic impact of import barrier removals, following Romania’s and Bulgaria’s EU accession, on bilateral trade, income, welfare, and total imports/exports, on Greece, EU24 (that is, EU25 minus Greece), and the Rest of the World (ROW), show positive overall welfare effects, with total Greek exports increasing by 0.25% (due to exports to Romania and Bulgaria), total Greek imports increasing by 0.54%, and large output effects for Bulgaria and Romania.