Analysis: Why divestiture in Greece is stopping

Analysis: Why divestiture in Greece is stopping

The formation of favorable financial conditions over the last months in the Greek economy could lead to the divestiture phase triggered by the financial crisis this year coming to an end for good this year. As Alpha Bank notes in its weekly bulletin for the economy, the current situation is characterized by the following.

First, a large increase in the total capitalization of listed companies. Secondly, a tremendous decline in the risk premium of the Hellenic Republic and consequently the yields of Greek government securities, as for the first time the Greek State borrows with interest-bearing bills that have a zero, even negative interest rate.

Thirdly, a continuous improvement of the general government debt sustainability, backed by a rapid reduction in borrowing costs, better expected growth dynamics, consolidation of political stability and higher budgetary performance. As a result, rating agencies continue to improve the rating of the country, as was recently the case with Fitch agency.

Fourth, a sharp decline in the borrowing costs of the Greek banking system, as reflected in the recent issue of Tier 2 by Alpha Bank. Fifth, a strong upward trend in the residential and commercial real estate market in terms of both price and investment activity. Finally, a significant improvement in the business expectations index in both industry and retail, which is close to the 2008 levels.

Foreign Direct Investment

More specifically, Alpha notes, from 2008 to 2018 a significant decline was recorded in net cash flow since the start of the crisis at the level of € 249 million in 2010, while in 2018 (€ 3.364 million) it had almost returned to its 2008. Level. Correspondingly, FDI flows as a percentage of GDP recorded significant fluctuations throughout the decade and stood at 1.8% in 2018, compared to 1.3% in 2008. Improvement from 2015 onwards went hand-to-hand with the country’s gradual exit from the crisis era, achieving marginal but also higher rates of recover, but also with measures included in the reform program in the context of fiscal consolidation, which began to bear fruit. However, despite the improvement achieved in recent years, our country remains in the bottom of the FDI ranking among the selected countries, as their total stock as a percentage of GDP in 2018 (16%) remained significantly below the corresponding average of the OECD countries (41%) and the EU (56%).

At a sectoral level, in 2018 the sectors of economy with the highest FDI stocks were: information & communication (17.1%), trade (15.7%), petroleum, chemical, pharmaceutical and plastic products (12 , 3%), transport & storage (11.5%), electricity, gas, water (8.5%) followed by private real estate (7.4%), real estate management (6.1%) and food-beverage-tobacco (6.0%).

Correspondingly, in terms of geographical structure, the countries with the highest stocks in Greece were Germany (22.7%), Luxembourg (21.7%), the Netherlands (15.6%), and Switzerland (10, 2%), France (4.9%) and Italy (4.7%). /ibna