2020 Investment Climate Statements: Greece
Η ανθεκτικότητα της ελληνικής οικονομίας θα δοκιμαστεί, με αβέβαιες επιπτώσεις στο επενδυτικό κλίμα
2020 Investment Climate Statements Released
The U.S. Department of State announces the release of the 2020 Investment Climate Statements.
The 2020 Investment Climate Statements help U.S. companies make informed business decisions by describing conditions in foreign markets regarding factors such as: openness to foreign investment; legal regimes and transparency; industrial policies; protection of real and intellectual property rights; state-owned enterprises; responsible business conduct; corruption; and political and security environments. The reports highlight efforts to reform business environments as well as persistent barriers to U.S. investment. Addressing these barriers would enable countries to: expand high-quality, private sector-led investment; build infrastructure that drives growth; further women’s economic empowerment; develop the digital economy; and facilitate healthy business environments. Such improvements in foreign countries’ investment climates would help level the playing field for business competition and create greater opportunities for U.S. businesses and workers.
Economic officers at U.S. embassies and diplomatic missions prepare these annual reports analyzing over 165 foreign markets.
The reports can be viewed at the following link: https://www.state.gov/investment-climate-statements/
2020 Investment Climate Statements: Greece
EXECUTIVE SUMMARY
After nearly ten years of austerity measures and reforms under three economic adjustment programs, Greece made significant progress in 2019 in its return to economic normalcy. The New Democracy party won elections in July 2019 on a mandate to continue to reform and streamline the economy as well as attract foreign direct investment. Growth reached an estimated 1.9% in 2019. The government exceeded its 2019 primary surplus target of €4.4 billion, recording a surplus of €4.96 billion. Major challenges remain, however, considering the economic disruption expected from lockdown measures imposed in response to COVID-19. At the end of 2019, Greece’s public debt was €342.9 billion, or more than 176% of GDP. Unemployment decreased slightly in 2019, reaching 16.4% by January 2020. Both of these numbers are expected to rise in the aftermath of COVID-19.
Greece maintains a liquidity buffer, estimated at €26 billion, thanks to the addition of a final €15 billion loan tranche disbursed by the European Stability Mechanism (ESM). So far untouched, the buffer should be sufficient to cover the country’s financing needs until at least the end of 2022, and the country’s leadership maintains its intention to reserve the ESM tranche solely for sovereign debt interest payments. Capital controls were completely lifted in September 2019. Greece remains subject to enhanced supervision by Eurozone creditors, and the government met its goal of a primary budget surplus of 3.5% of GDP in 2019. Greece had committed to meet the annual primary budget surplus target of 3.5% of GDP through 2022 and 2.2% afterwards, although its Eurozone creditors have suspended the surplus requirement this year due to COVID-19.
In previous years, concerns over economic and political stability within Greece essentially froze most new investment and caused some existing investors to scale down or withdraw entirely from the Greek market, but this is no longer the case. Success in the privatization of Greece’s fourteen regional airports, investment in the tourism sector, and the construction of the Trans-Adriatic Pipeline demonstrated the opportunities that have existed in Greece even during the height of the economic crisis. Greek travel and tourism receipts jumped 12.8% in 2019 to a record €18.5 billion with a 4.1% increase in tourist arrivals in 2019. Prices for residential properties rose 7.2%, a huge jump from 1.2% in 2018, and individual FDI in real estate has tripled from €414 million in 2017 to €1.45 billion in 2019. Chinese investors continue to eye Greece for real estate purchases, with inquiries from Chinese buyers increasing by 109% in the first quarter of 2020 as compared to the first quarter of 2019, with much of the interest attributed to Greece’s attractive Golden Visa program.
Greece’s return to economic growth has generated new investor interest in the country. In January 2019, Greece successfully raised €2.5 billion in a five-year bond sale at a yield of 3.6% and €487 million in 13-week treasury bills in October 2019 with a yield of –0.02%, the first time Greece has ever had a negative yield. In January 2020, Greece raised another €2.5 billion in a fifteen-year bond sale at a yield of 1.9%, demonstrating the country’s strong return to the capital markets.
In January 2020, Fitch ratings agency upgraded Greece’s credit rating to BB, although it lowered its outlook from ‘positive’ to ‘stable’ in April 2020 due to the financial impact of COVID-19. Standard & Poor’s raised Greece’s credit rating from BB- to B+ in October 2019, although it also downgraded its outlook to ‘stable’ in April 2020. For the first time, the European Central Bank (ECB) included Greek government bonds in its quantitative easing program, with €12 billion worth of Greek government debt to be purchased under the ECB’s €750 billion Pandemic Emergency Purchase Program in 2020.
Although Greece has seen positive developments in the past few years, investors worry about where Greece will be once COVID-19 subsides. The Greek Government has been given strong marks for its initial response in limiting the spread of the pandemic and has implemented several innovative digital reforms to its economy during COVID-19. The extent of the impact is yet to come, but the Bank of Greece, EU, IMF, and others have predicted a contraction of 4-15% in 2020. The tourism sector in particular, which comprises almost a quarter of the economy, is likely to take a hit with predictions of a 50-70% loss in tourism revenue. Estimates of unemployment hover around 20% or higher. As 2020 continues, the resiliency of the Greek economy will be tested, with uncertain impacts on the investment climate.
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