Greece is open For Business

According to the latest figures from the Bank of Greece, FDI inflows in 2018 reached a historic high of €3.3 billion, a 13.8% increase from 2017. Overall, FDI has tripled between 2015 and 2018 and is on track for a new record in 2019.

Economic output is expanding, fiscal goals are being met, and business activity is up, reflecting the country’s new growth phase. The upturn is reflected in the economic mood that spiked further upwards after the last elections in the summer of 2019.

Annual economic output is expected to reach the 2% mark in 2019, expanding for the third year in a row, according to forecasts, while the government predicts an ambitious economic growth rate of 2.8% in 2020.

Another indicator of confidence, felt by people on the streets of Athens and elsewhere around Greece, is reflected in bank deposit levels. Bank of Greece data shows that deposits from businesses and households rose to €143 billion in December 2019, versus €126 billion in 2017, and €121 billion in 2016 – though they are still way off their pre-crisis peak of €238 billion in September 2009.

Klaus Regling, Managing Director of the European Stability Mechanism (ESM), says Greece’s fiscal efforts are bearing fruit; but reforms must continue, and challenges remain. “The Greek government is reaping the fruits of a favourable market perception, the results of reforms implemented during the ESM programme and continued reforms,” he said. But he also added: “In the ESM’s view, growth-friendly initiatives are much needed since Greece’s economy is still vulnerable. It is particularly important that these initiatives give special weight to strengthening the institutional quality in Greece, as this has enormous influence on long-term growth.”

Looking at today’s conditions, it is important to differentiate between what is transpiring at present and the false start Greece’s economy experienced in 2014. Then, the country looked like it was exiting the crisis amid rising investments and a growing gross domestic product.

And yet, snap elections were held in January 2015. Six months later the country experienced a dramatic summer that nearly resulted in a ‘Grexit’ and Greece flying out of the eurozone.

This time round, however, there are several key differences. Firstly, the recovery is now at a much more advanced stage; and secondly, the political situation in Greece boasts much greater stability.

After winning re-election in September 2015, the leader of left-wing political party Syriza, Alexis Tsipras, just about exhausted his four-year term in office – an unusual development in Greece, where snap elections are more the norm than the exception.

During this period of relative stability, street demonstrations largely dissipated, and the economic recovery gained traction.

And after July 2019’s general elections, conservative party New Democracy was chosen to govern the country under the helm of Kyriakos Mitsotakis. The Harvard-educated, former financial consultant is a person seen by many – especially the markets – as the reformist who can deliver, and the leader who can create jobs, a key demand among Greek voters.

With a 158-seat majority in Greece’s 300-seat legislature, Mitsotakis has the luxury of being able to govern without a coalition partner. It is important to note that this is the first single-party government that has been elected in Greece since 2009.

Apart from this majority helping Mitsotakis make decisions he can implement, it also means that the stability of the government is not reliant on a fragile political partnership. Furthermore, parliament’s election of Katerina Sakellaropoulou as the country’s first female President of the Republic reinforces political stability going forward, as well as helping to close the still-too-large gender gap for senior posts in Greece.

But beyond the numbers, the economy has emerged from the crisis in a different shape. Many argue that this may well partly be a result of the crisis years forcing many businesses to rethink their strategies in a more extroverted way and spawning a spate of new start-ups. Exports and foreign markets are top on the priority list of Greek businesses, many of which had previously focused on domestic consumption.

And when Hellinikon does begin, it will likely act as a magnet for a host of other potential investments, both domestic and international, at a time when a number of privatisations are in the pipeline and Greece’s banks are tackling their NPL and liquidity demons.

According to Pierre Moscovici, the former European Commissioner for Economic and Financial Affairs, Taxation and Customs, investor confidence in Greece has dramatically increased and can continue to do so provided the reform momentum is maintained. “I am very optimistic about the prospects for the Greek economy. I am encouraged that the authorities have made clear their commitment to continue with a number of key reforms and measures to boost growth and jobs in Greece (…) investor confidence in Greece has already increased quite markedly and can continue on that trajectory provided the reform momentum is maintained,” he said.

The government’s pro-investment policies have so far had a positive impact as far as markets are concerned. And the message going forward to investors is clear: “the country has turned the page”, says Prime Minister Mitsotakis, adding that his government will “continue to do whatever it takes to restore credibility in the Greek economy”.