GIG Economic Bulletin – 07 June 2021

A more modest contraction than expected in the first quarter of this year, a record increase in the PMI index, and an upward revision of the growth forecast from the OECD were among this week’s good news stories for the Greek economy.

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Following an MoU signed between Volkswagen and the Greek government in November 2020, the Smart and Sustainable Island Project was launched on the Aegean island of Astypalaia, which aims to convert the island into the first emissions-free mobility centre in the region. A new insolvency framework for businesses and individuals came into effect on June 1, and the OECD has improved its economic growth predictions for Greece.


The economy shrank by just -2.3% in Q1 on a Y-o-Y basis following a -6.9% drop in Q4 2020, showing remarkable resilience despite the extended lockdown. On a quarterly basis the economy grew by 4.4%, according to preliminary data from the Hellenic Statistical Authority (ELSTAT).

The OECD’s latest economic outlook for Greece sees per capita GDP returning to 2019 levels by Q2 2022. The growth forecast is boosted to 3.8% this year from 0.9% before, while the outlook for 2022 is somewhat moderated from 6.6% to 5%. Investments are expected to grow by 11.5% in 2021 and 20% in 2022 boosted by the Recovery and Resilience Facility (RRF), while savings accumulated during the pandemic are expected to play a critical role in fanning the recovery.

The IMF is slightly less optimistic about this year in its latest post-programme report, which forecasts 3.3% GDP growth in 2021 followed by 5.4% in 2022. The Fund deems the country’s debt sustainable over the medium term without the need for further measures.

Greece’s PMI index recorded its strongest upturn in the last 20 years, reaching 58 points in May, from 54.4 points in April. Strong expansions in output, new orders, and employment were behind the boost, while business confidence reached a new high since February 2020.

Retail turnover was down -3% in March following a revised -4% drop in February according to ELSTAT. The corresponding volume index fell by -0.9%, after a revised decrease of -2.8% in February.

Registrations of new businesses were up 10% in the first five months of 2021 compared to the same period last year, according to the GEMI business registry, while closures were down by -46.7%. The fall in business closures is attributed in large part to the ongoing pandemic emergency support measures.

Over €25.5 billion were added to the stock of savings between February 2020 and April 2021, an increase of 12.3% bringing total bank deposits to €167.75 billion during the pandemic.

Exporters are expecting a growth of 3.3% in exports in 2021 according to responses to an ELSTAT survey. Exports were surprisingly resilient to the pandemic, growing 3.2% in 2020, while in Q1 2021 they recorded 9.6% growth overall, and 11.5% excluding oil products.

Insolvency Framework

The new insolvency framework for businesses and individuals came into effect on June 1, offering debtors a simple route to reach an out-of-court settlement of their obligations to financial institutions and the state. The framework will be administered via an automated electronic platform which will shorten the response time to two months.


Greece has received more than 150,000 visitor arrivals since the end of April, however so far only 2,500 hotels have opened for business, with the number expected to rise to 10,000 by the end of June. The government has introduced a new €420-million grant package for tourism which aims to boost liquidity and encourage more businesses to reopen.


Prime Minister Kyriakos Mitsotakis inaugurated a pilot programme in partnership with German multinational carmaker Volkswagen AG to turn the Aegean island of Astypalaia into a smart and sustainable centre for climate-neutral mobility, while also making the island a test-bed for green transportation. With the island housing approximately 1,500 vehicles with internal combustion engines, the plan entails replacing all vehicles with electric models, while reducing the size of the fleet by a third. Public transportation on the island with be replaced by a ride-sharing programme, and 200 electric cars will be made available to locals and tourists to rent. An aggressive subsidy programme aims to incentivise Astypalaia’s inhabitants to buy electric vehicles, bikes, and chargers.

VW Group CEO Herbert Diess and Prime Minister Kyriakos Mitsotakis during the handover of the ID4 police car in Astypalaia. Copyright: Greece Investor Guide

The installation on the island of a 3-Mwh PV park together with a 7-Mwh battery system by 2023 will meet all electric-vehicle charging needs. One to two wind turbines could be installed in a second phase of the project, covering more than 80% of the island’s total power demand by 2026.

In a separate announcement, Energy Minister Kostas Skrekas said the government plans to direct €1 billion from the economic recovery package to greening the Greek islands.


NBG booked profits of €577 million in Q1, compared to €304 million in the same quarter of 2020. Organic profitability reached €95 million. The group’s NPE ratio fell to 13.1% from 13.6% at the end of 2020, while organic NPE formation was negative in Q1 despite the expiry of pandemic-related loan moratoria.

Stock Market

The ASE general index notched up weekly gains of 1.57% to close at 901.60 points. Market cap reached a new high for 2021 at €63.5 billion. The big winners were the banking sector with gains of 3.68% and large caps with 1.86%.

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