GIG Economic Bulletin – October 12, 2020

International investors saw improvements in Greece over the last 12 months according to the latest EY survey, as the country’s state-controlled electricity provider detailed radical plans for its own “green new deal”.

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A study by EY reveals that Greece’s image as an investment destination has improved significantly over the last 12 months, while yields on Greece’s 10-year securities mark a new record, dropping to 0.88%. Meanwhile, a new tender for the sale of Hellenic Shipyards gains U.S. investor interest, and leading electricity producer PPC reveals ambitious plans for its de-lignitisation.

Fiscal

The draft 2021 budget submitted to Parliament operates on the central scenario of a -8.2% recession in 2020 and a recovery of 5.5% in 2021, boosted to 7.5% with funds from the EU recovery package. The Finance Ministry’s 2020 forecast is based on a -10% contraction in Q3 – normally the strongest quarter for the Greek economy – and a -7% shrinkage in Q4. The draft outlines €21.5 billion of emergency spending in 2020 to mitigate the impact of the pandemic, and defence spending of €2.5 billion in 2021, up from €0.5 billion in the current year.

Macro

Greece’s trade deficit dropped -27.1% Y-o-Y in August, compared to a fall of -17.1% in July. Imports declined by -19.6% Y-o-Y, while exports fell by -14.2%. Excluding the impact of oil products and ships, however, the trade deficit rose by 2.8% YoY.

Unemployment dropped to 16.8% in July, compared to 17.1% in July 2019, despite the loss of 64,500 jobs. However, there was an increase in the number of people not actively looking for work, which includes workers on suspended contracts due to pandemic measures.

GGBs

Greek debt continues to mark record-low yields despite the pandemic, with the benchmark on 10-year securities dropping to an all-time low of 0.88%, while the yield on 15-year bonds fell to 1.032%. On Wednesday, the PDMA once again issued T-Bills at negative rates, with the latest 3-month issue settling at -0.16%.

Investment

A survey of international investors by EY found that 38% think that the image of the country as an investment destination has improved over the last year, while 62% say that the policies followed in the last 12 months make it an appealing destination. Four in 10 said that the handling of the pandemic improved the country’s image. In 2019, Greece attracted 69% more European FDI, putting the country in 29th place, from 35th in 2018.

Privatisations

The Greek state launched a tender for the sale of Hellenic Shipyards SA, located in Skaramangas near Athens. The facility, which is currently under special administration, is being sold as part of the government’s plan to overhaul the country’s loss-making defence industry while boosting its defence capabilities. Interest has been expressed by a partnership between the U.S. International Development Finance Corporation and a Greek company.

The Environment and Energy Ministry is amending the law to speed up the sale of mining company LARKO, gas company DEPA Infrastructure, and electricity distribution manager HEDNO. The amendments aim to clarify various aspects of regulation and financing that were complicating the respective privatisations.

The offer of the Mohegan-GEK Terna consortium for the casino licence at Hellinikon exceeded initial expectations, according to government sources. The offer is for €150 million, while the bidder did not take advantage of the instalment offer and is expected to pay the whole amount in the first year. According to the bidder’s estimates the total investment in the casino and resort will exceed €1 billion.

Energy

PPC’s new strategic business plan centres on speeding up de-lignitisation by retiring the company’s coal-burning plants and replacing them with 6 GW of renewable power generation. Among the projects already licensed are 2.4 GW of large-scale solar farms. The country’s largest electricity supplier is also planning to install 10,000 electric vehicle chargers, as well as smart meters for its 7.5 million customers. The investments are costed at €2.2 billion, and will create 900 permanent jobs, and 3,000 contract positions during the construction phase.

Hellenic Petroleum (HELPE) raised just short of €100 million in a green bond issued at a yield of 2.42%. The funds will be used to buy a 204-MW solar park in the Kozani region of Western Macedonia, which is currently in the planning phase. HELPE aims to reach 600 MW of installed renewable energy capacity by 2025.

The Interministerial Committee on Strategic Investments has green-lit two renewable energy projects worth over €400 million since December, and is considering a further three in the next round, including a 1.5-GW solar investment by the Egnatia Group and two wind power developments, costed at close to €1.5 billion.

The renewable energy targets established in Greece’s National Energy and Climate Plan (NECP) entail €5 billion worth of investments by 2030 in solar and wind energy generation alone, in a bid for 35% of energy to derive from RES. Copyright: peterschreiber.media / Shutterstock

Stock market

The ASE general index closed the week up 4.12% at 651.47 points, marking the first significant uptick in several months of trading. There were total inflows of close to €1.3 billion during the week, bringing the total capitalisation up to €45.2 billion.

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