Greece economy briefing: The impact of climate change on the Greek economy

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Weekly Briefing, Vol. 64. No. 2 (GR) July 2023

 

The impact of climate change on the Greek economy

 

 

 

Summary

The briefing deals with the short- and long-term impact of climate change on the Greek economy. The prolonged heat waves of July and the major wildfires negatively affected the revenues of the tourism sector especially in the islands of Rhodes and Corfu in the short term. However, the continues rise of the average annual temperature is expected to have a long-term effect in tourism, agriculture, infrastructure and trade sectors. Its effect on the national economy as a whole seems to be undoubted, unless measures are taken.

 

Introduction

The wildfires that hit Greece in July resulted not only in a massive natural disaster but also largely impacted the tourism sector. In the island of Rhodes, where on the 17th of July a wildfire started burning for eleven days, thousands of tourists had to flee their hotels. In addition, airlines and travel agencies canceled their activities in the island until August. The revenue loses of hotels and tourist businesses in the affected islands are significant. This short-term impact is devastating for people working in the sector and economic measures need to be taken in order to protect the families that have been affected. Nevertheless, climate change and the consequent prolonged heat waves are expected to impact the economy in the long term as well. The government needs to re-design tourism in order for the sector to be sustainable in the future. In addition, agriculture, which is an important sector of Greece’s economy, is expected to be largely affected due to the rise of temperature and the consequent damage of crops in the summer period. Labor productivity and retail trade is also expected to be decreased due to the higher temperatures. Moreover, the decrease of water levels in major European rivers is projected to affect trade in the EU. This bleak prognosis concerns not only Greece but threatens the globe and the global economy. The states need to cooperate in order to accelerate the efforts to tackle climate change and its effects.

 

The recent wildfires

During the mid of July Greece was stricken by extreme temperatures and a prolonged heat wave, which was the longest ever recorded in the country. Specifically, from the 12 until the 26th of July the temperature recorded was between 30 and 46 degrees Celsius (1). Due to the high temperatures and winds more than 60 wildfires started in several areas of the country, such as the region of Attica, Peloponnese, Central Greece and the islands of Evoia, Corfu, Rodes and Naxos. According to data announced by the Institute for Astronomy, Astrophysics, Space Applications and Remote Sensing (IAASARS) the 13 biggest wildfires burned more than 434,120 acres of forest but also residential areas as well (2). Moreover, according to the service system “FireHUB” of the IAASARS, the fires of July caused a significant increase in burned areas, marking the highest levels recorded in the last 13 years (3).

It is worth noting that one of the biggest wildfires hit the island of Rhodes, which is one of the top touristic destinations in Greece. Due to the uncontrolled fire a massive operation of evacuation of houses and hotels was organized. Many airlines cancelled all flights, such as EasyJet and British airlines, as well as travel agencies suspended their holiday offers to Rhodes, (4). Approximately 19.000 people – most of them tourists – forced to flee their hotels. In addition, flights were canceled during this period. With announcements from foreign offices of mainly the UK and Germany for protecting their citizens, as well as media all over the world reporting the situation, it is no secret that the touristic season and income of the island was disturbed, along with the massive natural catastrophe, which will affect the island for years to come. In the island of Corfu, a similar situation was registered in a smaller extent with approximately 2.000 people relocated by sea and land from high risk areas. The Mister of Tourism Olga Kefalogianni announced that the majority of the country, including parts of the affected islands remain safe for tourists, in order to minimize the reputation damage (5). However, even without the fires the high temperatures may affect the country’s attraction as a tourist destination.

 

The consequences of climate change  in economy

Tourism as the “heavy industry” of Greece is a one of the most important sectors of concern. The recent wildfires without a doubt had an economic impact in the affected areas, since many tourists individually but also tour operators had suspended the holiday trips to the islands of Rhodes and Corfu. However, the hotel infrastructures in Rhodes are 95% intact, as well as the seaport and airport, the same occurs in Corfu. Hence, the affected islands are ready to welcome again tourists, meaning that the economic consequences of the wildfires in the tourist sector were rather short-term than long-term (6).

Nevertheless, the climate change is gradually changing the “pleasant” climate of Greece, especially in the summertime. Thus, the big question is whether the climate change will affect the tourism flows in the country and what would be the next steps in order to avoid a decrease of tourism flows. According to Professor Christos Zerefos, mainly due to the climate change the Greek tourist season would start earlier in Spring and last until the fall, a trend that has already registered during the last years (7). In addition, the touristic product that Greece offers has also started changing with more and more tourist visiting Greece not only for the nice beaches but for the culture and history. The leading provider of credit ratings Fitch, is not so optimistic, since it foresees that climate change will affect the airlines, hotel chains and tourist businesses. Thus, it is necessary for the country to redesign its touristic product (8).

Another important sector of the Greek economy that is expected to be affected by the climate change is agriculture. The prolonged heat waves destroy crops, which in return decrease the income of the farmers, increase the cost of production, as well as the product prices. According to Eurostat, the economic losses due to the effects of climate change in agriculture reached 145 billion euros in the EU member states in the decade 2010-2020. Furthermore, it is estimated that losses are increasing by 2% each year. It is worth noting, that according to the same data, the highest economic loss -92 euros per person- was registered in Greece. France comes second in the list with 62 euros per person. In general, the economic consequences of natural disasters in Greece, attributed to the climate change, such as heat waves and floods, according to Eurostat data, costed the country approximately 2,03 billion euros in the time period between 2016-2021. Moreover, the European Commission projects that if the average global temperature rises 1,5 degrees Celsius the Greek public debt to GDP ratio will increase 2,6% (9).

In addition, the high temperatures affect the labor productivity, especially in the sectors that acquire physical strength, such as the infrastructure sector. According to a research published by the Adrienne Arsht Rockefeller Institute, it is projected that Athens will lose 230 million euros due to the decrease in labor productivity by 2050 (10).  Moreover, the high temperatures have decreased the level of water of major European rivers, such as Rhine- which has registered the lowest water level since 1970- raising obstacles to the passage of the trading vessels, affecting also trade in the European continent and beyond (11). Retail trade in Greece was also affected by the high temperatures of July. Specifically, during the period of the summer sales retail registered losses of turnover up to 30% compared to the corresponding period last year. This decrease was attributed to the prolonged high temperatures, which limited the shopping activity. Shopping centers and department stores were the winners of the first two weeks of the summer sales, due to the well air-conditioned spaces (12).

 

Conclusion

The climate change and its effects put a major risk to the global and national economies. In Greece it is expected that the sectors of tourism, agriculture, infrastructure and trade would be directly affected by the consequences of the climate change. Specifically, the high heat would decrease the interest of tourists to visit Greece during the months that heat waves are prevailing. In addition, in the sector of agriculture, prolonged heat waves in the summer and floods in the winter months destroy crops, which in return increase the prices of production and the prices of the products. Moreover, low labour productivity due to the high temperatures would also affect the economic development of the country. In a nutshell, it is projected that extreme weather would affect every aspect of human activity and thus the economies as a whole in the near- and long-term future. All governments and of course the Greek government needs to elaborate on an effective strategy and urgently take measures in order to protect the environment but also tackle the consequences of the climate change in the economy.

 

 

References

https://www.in.gr/2023/07/26/b-science/perivallon-b-science/pyrkagies-mayro-rekor-oi-perissoteres-kamenes-ektaseis-ton-teleytaion-13-eton-sta-teli-iouliou/