GIG Economic Bulletin – 13 September 2021

Better-than-expected Q2 growth figures led the government to up its annual growth forecast to 5.9% from its previous estimate of 3.6%. Two major privatisations in the energy infrastructure sector confirmed Greece’s attractiveness as an investment destination, while a ratings upgrade from Scope placed Greece one step from investment grade.

Economic BulletinInsights
Greece’s privatisation fund HRADF announced winning bidders for two strategic energy privatisations – 49% of power distribution manager HEDNO/DEDDIE and 100% of DEPA Infrastructure – reaffirming international investor interest in the Hellenic market. The Greek government upped its 2021 growth forecast to 5.9%, Prime Minister Mitsotakis announced a slew of tax cuts and measures to boost youth employment and cushion the effects of inflation, while an upgrade by ratings agency Scope places Greece one notch from investment grade.

Macro

The government’s official 2021 growth forecast has been revised up to 5.9% from 3.6% based on better-than-expected growth figures for Q2.

Greek GDP grew by 16.2% on an annual basis in Q2 2021, according to preliminary figures released by the Hellenic Statistical Authority (ELSTAT). The growth rate, which Prime Minister Kyriakos Mitsotakis described as “surpassing expectations,” puts Greece in line with the fastest growing EU economies for the quarter.

Ratings agency DBRS raised its 2021 forecast to 5.2% following the ELSTAT release, while it has also withdrawn its earlier adverse scenario which had growth at 3%. Meanwhile, Scope ratings upgraded Greece’s sovereign credit rating from BB to BB+, making it the first ratings agency to put the country just one notch below investment grade.

The Finance Ministry will be revising up this year’s investment growth estimate of 7% in light of the preliminary growth figures which showed double-digit gross fixed capital formation.

Inflation surged by 1.9% in August according to ELSTAT. The biggest increase was seen in the price of natural gas which rose by 91%, followed by heating oil at 28% and fresh vegetables at 21.5%. Although lower than the Eurozone average of 3%, this is the biggest inflation increase of the past decade in Greece.

Fiscal

Prime Minister Mitsotakis used his annual address at the Thessaloniki International Fair (TIF) to announce an ambitious programme of tax cuts and measures to boost youth employment and cushion the effects of inflation, under the banner “Greece is changing”. Measures include a reduction in the corporate tax rate and the ENFIA property tax, a freeze on the solidarity top-up tax for a further year, tax discounts for green investments, reduced VAT on a range of consumer goods, and hiring bonuses for young workers and their employers.

GGBs

Société Générale expects the PDMA to continue issuing sovereign debt in 2022 at a similar rate to 2019, reaching €5-15 billion in new issues to take advantage of the ECB’s pandemic emergency purchase programme (PEPP) before it ends in the coming year. The ECB is due to end the PEPP and re-evaluate the regular asset purchase programme (APP) during 2022.

Privatisations

Spear WTE Investments, a special purpose vehicle owned by Macquarie Infrastructure, won the bidding for 49% of power distribution manager HEDNO/DEDDIE with an offer of €2.116 billion, making the deal the largest privatisation in Greece to date.

Spear WTE Investments Sarl’s offer far exceeded the threshold offer of €1.5 billion. Copyright: Dimitris Papamitsos/PM’s Office

Italgas has been officially named the preferred bidder for DEPA Infrastructure after state privatisation fund HRADF and minority shareholder Hellenic Petroleum accepted the company’s improved offer of €733 million. The new investor has also committed to a €560-million investment programme over a five-year horizon.

HRADF plans to accelerate the tender for the port of Alexandroupolis to bring forward the deadline for binding offers to the end of 2021, in the hope of transferring the port’s management in H1 2022.

Real Estate

Property prices in Athens have risen by 6.4% in Q2, while the Thessaloniki market has also seen an increase of 4.1% according to the Bank of Greece (BoG). The BoG index rose by 7.2% in 2019 and 4.4% in 2020. The rises come despite a 50% decline in the number of property transactions in 2020, and a drop in foreign direct investment in property in the region of -40%, which also dented revenues from the Golden Visa programme to the tune of -73%, as COVID kept foreign buyers away.

Banks

The next few months will see several major securitisation deals by the Greek banks, including Piraeus Bank’s project Dory, worth €800 million, NBG’s Frontier II at €1.5 billion and Alpha’s project Skyline, all aiming to bring the lenders’ NPE ratios down to single digits as early as next year.

NPEs were reduced by €29.4 billion in H1, totalling a -52% drop Y-o-Y. The NPE ratio across systemic banks now stands at 20.3%, from 43.6% in June 2019.

After Eurobank’s announcement that it intends to apply to the regulators to make a dividend pay-out in 2022, Alpha Bank and Piraeus Bank have also hinted at dividends in 2023 and 2024, respectively, while NBG has said it also plans to issue a dividend in the next couple of years.

Eurobank’s issue of a 6.5-year senior preferred note attracted €800 in offers, raising €500 million at a yield of 2.375%. Eurobank has now issued a total of €1 billion in senior preferred notes, with the previous issue in April priced at 2.125%.

Stock Market

The ASE general index dropped -1.53% on a weekly basis to close at 910.13 points after a week of slow trading, during which it dipped below 900 points.

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