GIG Economic Bulletin – March 29, 2021

Progress on a number of fronts, including debt securitisations and the Hellinikon redevelopment project brought a rebound to the Athens Stock Exchange this week, as Greece took the first measured steps to reopening tourism.

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Greece inches closer to the revival of its travel industry with the reopening of borders to Israeli travellers presenting a Covid vaccination certificate, while analogous accords are in the works with countries including UAE, Saudi Arabia, Russia and China. Meanwhile, bank securitisations and progress on the Hellinikon privatisation sparked a wave of buying and weekly gains of 2.25% on the ASE general index.

Macro

The Parliamentary Budget Office (PBO) has produced a forecast of 2.7% growth for 2021, one of the lowest so far in a wide array of forecasts, ranging from 3.5% by the European Commission to 0.9% by the OECD. The PBO puts the total cost of support for the pandemic over 2020-2021 at €35 billion, €5 billion higher than was foreseen in the 2021 budget.

Greece’s current account balance posted a deficit of €435.7 million in January compared to €653.8 million in December 2020, according to figures from the Bank of Greece (BoG). January saw an improvement in all balance of payments components with the exception of services. On a Y-o-Y basis, the goods deficit declined by -21.2%, while the services surplus contracted by -30.9%. The travel balance showed a surplus of €2.4 million, dropping -97.6% Y-o-Y as the number of foreign visitor arrivals plummeted by -87.9% compared to January 2019.

Credit by banks grew by 3.7% Y-o-Y in February, according to the BoG, equalling January’s rate.

Private sector deposits increased by €741 million in February, following net outflows of €1.19 billion in January. Total private sector bank deposits now stand at €162.9 billion.

GGBs

Ratings agency DBRS kept Greece’s rating unchanged at BB (low) and the outlook stable. The report notes that the country’s cash reserves from years of fiscal overperformance, together with its participation in the ECB’s PEPP scheme put Greece in a relatively secure position to handle the pandemic, while the 9% GDP boost from the EU recovery programme over the coming years strengthens its growth prospects.

Energy

Investments in the energy sector are expected to top €15 billion over the next five years, with projects covering natural gas and electricity networks, RES, energy storage, hydrogen and carbon capture. Greece is planning to channel €6.2 billion in grants from the EU Recovery and Resilience Fund towards “green transformation” projects, with the balance of funding expected from a combination of public and private sector investments.

R&D

R&D expenditure in Greece rose to 1.27% of GDP in 2019, compared to 0.68% in 2011. Investment in R&D topped €2.3 billion in 2019, of which over €1 billion came from the private sector. Over 54,800 people were employed in R&D in Greece in 2019, 7% more than in 2018.

Tourism

Greece opened its borders to visitors from Israel under a bilateral agreement which requires travellers to provide evidence of their Covid status. The scheme allows up to 10,000 Israeli citizens to enter Greece weekly. Further bilateral deals are being negotiated with the UAE, Saudi Arabia, Russia and China.

At least five large cruise operators are planning to use Greece as a homeport over the summer season, while up to 12 operators in total plan to include Greek island destinations in their routes. Among them are subsidiaries of Carnival, Royal Caribbean and Norwegian, while Celestyal Cruises plans to start sailing from Piraeus on May 29.

Santorini. Copyright: Celestyal Cruises

Holiday bookings from the UK froze following the announcement of further travel restrictions including a £5,000 fine for unnecessary foreign travel by the UK government, according to tour operator TUI.

Banks

Alpha Bank reported a net profit of €103.7 million in 2020, compared to €105.3 million in 2019. The bank is planning a new securitisation of €2 billion, codenamed “Cosmos”, and sales of bad loans worth €1.3 billion, with the aim of bringing its NPE ratio down to single digits by the end of 2022.

Privatisations

The Greek Parliament voted to approve the agreement with the developers of the Hellinikon site, moving one step closer to inking the deal. The agreement gives Lamda exclusive rights over 30% of the site and surface rights to develop the rest of the site for a period of 99 years.

Covid-19 Measures

Economic support measures in Greece this year will rise to €13 billion to cover the cost of another week of lockdown.

Stock Market

Bank securitisations and progress on major deals like Hellinikon drove a wave of buying, leading to weekly gains of 2.25% for the ASE general index, which closed at 851.82 points on Friday.

The top 10 listed companies on the ASE drew close to €2 billion from foreign investors over the past month. The companies are valued collectively at €34.4 billion, making up approximately 62% of the total capitalisation of the ASE.

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