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Greece's inflation rate is at historically low levels, food and energy prices are at their peak

07 August 2013 / 17:08:16  GRReporter
8705 reads

The main reasons for the period of deflation we are experiencing include: a) the considerable decline in disposable income, b) the unprecedented prolonged recession, c) the declining effect of the increases in indirect taxes, and d) the significant decline in international fuel prices.

However, it seems that the pressures from the economic recession, the rising unemployment and the reduced income and consumption is continuing, which is leading to the shrinking of the profit margins of the companies and is dragging down supply and demand."

At the same time, market factors indicate that the further development of competition will significantly contribute to the reduction of prices of goods and services.

It has been repeated many times that the Greek economy suffers from the lack of competition in comparison with the economies of other developed countries.

The reasons can be found in the existing structure of certain markets, such as that of retail/wholesale, but also in the lack of reforms in other sectors, mainly in the service sector in which there are still privileged professions that have remained closed.

At the same time, the need for a gradual change in the rates of indirect taxes is being recalled since this will accordingly reduce the prices as seen after the recent decision to reduce VAT in catering from 23% to 13%.

Radical changes in consumption models

The forecasts remain bleak and indicate that goods and services in Greece will remain disproportionately expensive compared to incomes and that the conditions of deflation reported in recent months will have to remain stable for a longer period of time in order for the prices to actually decrease.

What is certain is that the purchasing habits of consumers have significantly changed. This trend, according to market factors, will remain in the future regardless of whether economic recovery will follow.

As claimed by representatives of the food retail branch, Greek consumers have turned to the principle of targeted shopping. A good example of this is the basket in the supermarket that does not contain unnecessary goods.

The same specialists state, "The strategies of the companies doing business in Greece are now aiming at attracting the new consumption model which, until recently, has been followed mainly in the countries of north Europe." In particular, they state, "The image of the consumer who buys half a watermelon is not only a sign of the recession but is part of a culture in which the costs should serve specific needs and only them."

As experts explain, the consumers are limiting their impulsive decisions, increasing the degree of planning their purchases, looking for products at lower prices and for promotions.

At the same time, they are becoming more frugal, limiting the total value of their purchases, focusing on essential goods, reducing their visits to supermarkets and travelling less by car.

Tags: DeflationGreek statistical serviceConsumer price index
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