GIG Economic Bulletin – June 29

As Greece prepares to fully re-open to tourism on July 1, business leaders put forward strategic proposals to transform the economy through the EU Recovery Fund.

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An adjustment of the government’s economic forecasts for 2020 predicts up to an 8% slump in GDP. Greece makes notable progress in the European Commission’s Innovation Scorecard between 2012-2019, while the country’s regional airports prepare the resumption of international connections on July 1. Meanwhile, the banking sector secured €35 billion in liquidity from the ECB’s TLTRO programme, and the U.S. International Development Finance Corporation expresses interest in the acquisition of Greece’s Elefsina Shipyards.

Macro

The Finance Ministry has revised its previous forecasts of the economic impact of the pandemic, now predicting a -15% to -16% contraction in Q2, and a hit to GDP amounting to -7.5% to -8% for the full year, bringing it closer in line with forecasts issued by international organisations.

Tax revenues fell 43% below targets in May, partly due to emergency measures such as tax deferrals and pre-payment discounts. Over the period between January-May revenues undershot the target by €2.2 billion or 12.6%, which combined with spending on emergency measures pushed the budget into a €7.5-billion-euro deficit. The Finance Ministry is expected to publish revised budget targets in light of the new conditions created by the pandemic, while the government mulls extending and strengthening some of the support measures.

Over 80% of SMEs say they are operating with reduced revenues since the lockdown was lifted, leading to concerns about a new wave of defaults. Four in 10 SMEs surveyed by the Small Enterprises’ Institute Hellenic Confederation of Professionals, Craftsmen and Merchants (IME-GSEVEE) say they will not be able to meet their tax obligations, and one in three believe they will be unable to pay social security contributions. Half of businesses with loans are also concerned about servicing them.

The Hellenic Federation of Enterprises SEV is calling on the government to focus on a strategy geared towards directing EU funds to the economy. Digital transformation, energy efficiency, the circular economy, innovation and workers’ education are seen as promising areas, where investment could help Greek industry improve productivity and create globally competitive products.

Innovation

Greece showed one of the biggest improvements in performance among European countries in the European Commission’s Innovation Scorecard between 2012-2019. The country’s performance rose from 63% to 83% of the EU average. Greece scored particularly well in SMEs collaborating with others, SMEs innovating in-house, and SMEs with marketing or organisational innovations, while the weakest dimensions were intellectual assets, and an innovation-friendly environment.

Business visa

The government has presented more details on the “business visa” scheme introduced earlier this year. The programme is designed to attract more inward investment by allowing for Greek businesses to sponsor partners, business visitors, and potential investors from third countries to travel to Greece for meetings, exhibitions and conferences.

Banks

Greek banks secured €35 billion in liquidity from the ECB’s TLTRO programme, with the amount split equally between the four systemic lenders. The liquidity will be principally directed towards loans to the real economy, while a portion of the funds will also be used to purchase Greek government bonds.

Private sector bank deposits grew by €1.7 million in May, marking an increase of 9.4% year-on-year for bank deposits by households and businesses. New loans to businesses grew by €429 million in May, equivalent to a 4% yearly increase.

Moody’s gave a positive assessment to the gradual transfer of €30.8 billion euros of NPEs off the balance sheets of Greek banks and into the hands of servicers. In its assessment, the ratings agency noted that the transfer will not only improve the banks’ balance sheets but also allow them to concentrate on improving profitability in their core businesses.

Tourism

Greece is preparing to open its regional airports to international flights on July 1. Airports and resort businesses are finalising preparations to adhere to enhanced health and safety protocols, while the government awaits the outcome of negotiations at an EU level on the reopening of borders with third countries.

A travel sentiment survey by tourism consultancy Horwath HTL has ranked Greece among the top three favourite Mediterranean destinations for travellers planning to holiday abroad in the next few months. Greece positioned third after Spain and Italy.

Hotel occupancy rates in Athens remained at low levels in June, with summer bookings at 8% – 12% of capacity. Several of the capital’s marquee hotels plan to open in July, according to press reports, but others have yet to decide on a plan.

Film

Greece is hosting what claims to be the first post-pandemic European film shoot on the island of Amorgos. Cameras started rolling on a German-Italian-Greek co-production titled “Töchter” shortly after the lifting of lockdown under enhanced safety protocols. Greece hopes to attract more international productions by raising its cash rebates from 35% to 40%.

The filming of “Töchter” will place the Cycladic island of Amorgos in the limelight. Copyright: Nel 727 / Shutterstock.com

Shipbuilding

Onex Neorion Shipyards has agreed to a cooperation framework with Israel Shipyards Ltd for the production of a corvette dubbed “Themistoklis” based on an Israeli design. The 72-metre utility warship could be produced for the Hellenic navy or for third countries.

Meanwhile, The U.S. International Development Finance Corporation (DFC) has expressed interest in the purchase of the Elefsina Shipyards via Onex Shipyards with a view to establishing a hub for the support and servicing of LNG shipping. The DFC announced its intent in a letter to the Development Ministry in which it announces that it will proceed with conducting due diligence on the investment.

Aviation

AEGEAN Airlines will be pressing ahead with new aircraft orders, despite recording losses of €85.4 million in Q1. Passenger numbers were down 15% compared to the same period in 2019, while the company performed 6% fewer flights, as restrictions in movement due to the COVID-19 pandemic came into force at the end of the quarter.

Hellinikon

Lamda Development are all set to begin construction works on the Hellinikon project, independent of construction on the resort casino. The first phase of the project will absorb €2 billion over a five-year period.

Stock market

The ASE general index closed the week down -3.9% at 640 points, with the banking sector losing -7.3%. The selling was driven primarily by international developments, with investors spooked by the global surge in Covid-19 infections.

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