GIG Economic Bulletin – November 23, 2020

Greece’s post-pandemic action plan aims to leverage the €32 billion from the NextGenerationEU grants and loans to fund strategic projects in infrastructure and public services with a view to transforming the Greek economy for the day after.

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Strategic projects focused on green and digital investments along with infrastructure developments will be the focus of Greece’s post-pandemic action plan, totalling €32 billion in loans and grants channelled through the EU’s recovery fund, dubbed NextGenerationEU. The final stage of Greece’s €870 million Ultrafast Broadband (UFBB) project is due to roll ahead in late January 2021. Meanwhile, Marathon Venture Capital has launched a €40-million fund targetting Greek start-ups alongside key partners and investors.

Next Generation EU Fund

Greece’s submission for NextGenerationEU, the European Union’s pandemic recovery fund, has been described as “game-changing”, as it aims to leverage public and private funds to fundamentally re-align the Greek economy towards a more extroverted model.

The government plans to use the €12.5 billion of loans to back business credits through commercial banks. The projects will need to be in line with EU priorities and the funds from the Recovery and Resilience Facility – a key instrument at the heart of NextGenerationEU – will cover half of the investment. Assuming up to 30% is also financed by banks, this could leverage investments worth around €25 billion.

The total €32 billion in grants and loans will be directed towards a series of strategic projects, including highways, energy efficiency interventions, the full digitisation of the tax service, and the reform of the justice system.

Fiscal

The final 2021 budget submitted to Parliament sees GDP dropping below €170 billion, with a recession of -10.5% in 2020 and a recovery of 4.8% in 2021. The primary deficit has been revised to -4% of GDP from just -1% in the draft, to account for further pandemic support measures extending into April 2021, while the debt ratio is expected to rise to just under 209% by the end of 2020.

The European Commission’s debt sustainability report found that the effects of the pandemic on national debt will be felt until 2050, with the debt ratio remaining above 100% of GDP until 2040.

Macro

The pandemic has resulted in a loss of 15% of turnover in the private sector, equal to €35 billion, in the first three quarters of 2020 according to figures published by the Hellenic Statistical Authority, ELSTAT. In sectors connected to tourism the losses exceed 50% of turnover.

The current account deficit continued to grow in September, largely due to the loss of income from tourism which wiped out the previous year’s surplus in the services sector. September 2020 closed with a negative balance of €498.9 million, compared to the surplus of €914.1 million recorded in September 2019. Over the first nine months of 2020, the current account deficit shot up to €8,612 million from €90.1 million for the same period of 2019.

Industrial turnover fell by 10.7% Y-o-Y in September, after a drop of 15% in August, according to ELSTAT, marking the eighth consecutive negative reading in as many months.

Greece’s manufacturing PMI slipped to 48.7 points in October from 50 points in September, as the second wave of coronavirus impacted demand across Europe, notably in the food sector.

Privatisations

The budget forecast for privatisation revenues has been reduced to zero, from the original forecast of €2.5 billion, due to delays caused by the pandemic which have pushed the closing stages for many projects beyond the end of 2020.

Digital

The final stage in the tender process for the €870 million Ultrafast Broadband (UFBB) project is due to kick off in late January 2021. The project has already secured €223 billion of EU funding and will be the largest public-private partnership project to date in Greece. Nine parties have declared an interest in participating, including some of Greece’s largest telecoms and energy players.

Greece’s Ultrafast Broadband project will develop next generation access (NGA) infrastructure in order to deliver high speed services to users in Greece. Copyright: Casezy idea / Shutterstock

Marathon Venture Capital has launched Marathon Fund II, a €40-million fund investing in Greek start-ups, with the participation of the European Investment Fund and Hellenic Development Bank, alongside private and corporate investors.

Tourism

Figures released by the European Travel Commission showed Greece among the hardest-hit countries for arrivals in the first eight months of 2020. Arrivals were down by -68% compared to 2019, placing Greece fourth in terms of impact.

Stock market

The ASE general index closed the week with 6.67% gains to close at 699.45 points, with November shaping up to be one of the best months of trading on record. The banking sector was up +20.68% and large caps recorded gains of 6.68%.

The expert committee charged with making policy recommendations to boost the Greek capital markets has presented the Finance Ministry with 54 proposals, ranging from regulatory reforms and tax incentives to the creation of new products such as green bonds, the introduction of financial literacy programmes and the fostering of a fintech sector.

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