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Why Greece? The curious case of country rankings

Guest: Callum Williams, senior economics writer at The Economist

Greece was named the #1 economically successful country in the world last year by The Economist. That’s surprising for a country that just until recently was dealing with political and economic mayhem. Is this a Greek revival, or is something else going on?

The answer is both. Greece has bounced back, but country rankings have changed.  Let’s talk about that.  Country rankings – whether it’s about the economy, democracy, or environmental standards – are important for a country’s reputation. But, since COVID, the f “measuring” countries has become increasingly complex. The pandemic changed human behavior in more ways than one. In this year’s economic rankings, Turkey, on the verge of dictatorship and with sky-high inflation, ranks well above the US. Colombia was higher than Denmark. And Greece was the #1 economically successful country in the world. What determines these rankings at a time of deep economic uncertainties? Callum Williams from The Economist joins us to explain his team’s macroeconomic exercise.

We were very surprised by these rankings, so we started with the obvious question – how were they determined? How do you rank economic winners these days? Williams said, “In this particular exercise, we took a broader look at which economies have done well and which are done badly. So, we do look at GDP over the past year, but we also look at inflation. We also look at what we call inflation breadth, which is basically what share of goods and services are seeing fast price rises. That gives an indication of how long inflation’s going to hang around. Then we look at two more things. One is share prices. Then the final thing is government debt.”

Many of the other top economies were European. We asked Williams about the common denominators of that success. Our guest said, “What’s really going on – or at least partly what’s going on here – is that a lot of these countries in southern Europe did extremely badly in 2020 and 2021. That was partly because they had strict lockdowns. But also, a lot of these countries are very reliant on tourism, which obviously fell to close to zero in 2020 and for lots of 2021. So, at the start of 2021, they were a long, long way behind. 2022 was the year in which they did catch up actually with the rest of the world. And that’s why they come top of the ranking.”

The global economy is becoming less integrated, and countries’ economies are getting more difficult to analyze and predict. What makes this world so hard to figure out? Williams said, “There’s a couple of things going on. One is a boring answer which is that a lot of the data that economists typically use to analyze the economy is just less reliable now than it used to be. But I think also so many very unprecedented things have happened which means that the rules of previous processions perhaps don’t apply. Stimulus checks are one of them. Essentially pressing off on an economy and then turning it back on again is not actually something that’s been done before. No one really knows how economies behave under those circumstances. Everything is completely topsy-turvy, which makes it both difficult to understand. But as a journalist, quite interesting.”

Altamar’s Muni Jensen asked about the indicators. Are there new sets of measuring criteria that have emerged or fallen off the rankings in the past years? Williams said, “Official data is becoming less useful and unofficial data is becoming a bit more useful. With official data, the economy is a bit weird at the moment. Another big problem is that people are a lot less willing than they were to respond to official surveys. So [official surveys] have become less reliable and also more volatile. They jump around more than they used to because sample sizes are smaller than they should be. On the other hand, you have the development of these alternative sources of data, which don’t rely on surveys. They rely on people just doing their day-to-day stuff. What that means is that you’ve got this massive explosion of all these alternative sources of data, which actually give a pretty accurate, if treated carefully, an up-to-date measure of the economy.

How do you compare trends if you are using new sources of information? How can you compare Greece from before and after for example? Williams said, “You have to calibrate the official data by looking at the unofficial data. You’d be like okay GDPs giving me a signal, which is that the economy is slowing, which is correct, I think. The private sector data, non-official data, also show the economy is slowing. So, the direction of travel is the same. It requires analysts to draw on a bigger set of data than they might have done in the past.”

Resiliency has been an important word since the beginning of COVID-19. How do you measure it and which countries have been the most resilient? Williams said, “A lesson from the past three years is that economies are more resilient to external shocks than people thought. The two big examples of this are COVID itself and then the energy price shock that Europe has experienced for a lot of the last year. As to the question of which countries, in general, are more resilient, it really is to do with how diversified your economy is. So, the US for example, massive economy, massive market that has loads of different industries, tech, finance, manufacturing, industrial, hospitality, energy supply, and all that kind of stuff. Maybe it’s not that surprising that the US rebounded really quickly in 2020 and 2021. Whereas back to our conversation about Greece and Spain and Portugal and so on, those countries are disproportionately reliant on tourism. And so, when that went under, those countries were in real trouble.”

The initial measurements were purely economic. Altamar Peter Schechter asked about adding in politics. He asked, “Is it fair to analyze only economic indicators without taking into consideration what the political environment is like?” Williams responded, “There are indicators that you could have put in, I suppose. For example, there’s stuff that’s in the opinion polls- what share of people would vote or say they would vote for a populist party- that’s a common thing. Things like general happiness, I suppose. What is definitely true in lots of countries, basically everywhere, to be honest, is that in 2022 consumer confidence came down a lot. Maybe you could call that a political thing. People basically became less happy in 2022. People seem more angry and sadder about the world than ever before.”


We finally came around to the big winner – Greece. What indicator took Greece all the way to the top of the rankings? Williams said, “There were probably two in particular. One was its stock market did okay. The other thing is their inflation problem wasn’t as bad as other countries. That could well be because unemployment is still pretty high in Greece. So, you didn’t have the extent of – a big driver of inflation in say the US was like a super, super, super tight labor market where wages were being bid up again and again and again. In a sense their lower inflation in 2022 partly reflects the fact that their economy, when all is said and done, is actually still weaker than the US. It had a good year relative to normal years. But it still has very high debt and it’s still got very high unemployment.” Not the glowing review of Greece’s economy we were expecting. But Greece has improved remarkably in the past decade to even be close to the top of this list. Still, something worth celebrating!

Speaking of celebrating, Altamar’s Téa Ivanovic closed the podcast by asking about Greece’s rise on other Economist lists – specifically the democracy index and environmental index. This is a big deal for a country that has struggled so much recently. How important is being high on these rankings for Greece? Williams said, “At the margin, people who had written off Greece before might now look at it again. Hopefully, it helps a bit. It would be nice to see Greece doing well for a change.”  

Do you agree with The Economist’s ranking system? What other indicators would you add? Find out more by listening to the latest Altamar episode, available wherever you get your podcasts. You can download the episode here

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