Greece: Investment ‘boom’ in the next two years

Greece: Investment ‘boom’ in the next two years

The European Commission estimates that the high growth rate of investment in 2017 (9.6% on a yearly basis against a 5% estimate in the 2018 budget) will continue in 2018 and 2019 at a two-digit rate change. The above is mentioned in the March-April 2018 Economic Development Bulletin of the Ministry of Economy describing the situation and prospects of the Greek economy.

Where growth is based

The estimation about a high rate of investment growth in 2018 is based on:

-The impact of the forthcoming liquidation of overdue public debt to the private sector of € 3.5 billion by August 2018, which is expected to boost investment (and private consumption) in the second half of the year. According to an IMF / ECB empirical study (22-1-2015), it is estimated that the 1% of GDP fall in arrears will result in an increase of 0.6% – 0.9% of GDP.

The € 3.5 billion of financial space that, according to the measure under preparation, will be created after 2018, boosting the economy’s prospects either through reduced tax rates or other ways of lightening the real economy,

– in the Development Strategy, which includes planning for: infrastructure, improvement of the business environment, strengthening the country’s export potential, attracting foreign investment, creating more jobs, strengthening strategic sectors of the economy and developing new and medium-sized enterprises,

-the gradual increase in the net investment position of households and enterprises and the increase in their deposits, which already rose from € 119 billion in April 2017 to € 126 billion in March 2018,

– the gradual increase in funding to private non-financial corporations, as shown by the Bank of Greece data (+225 million in March),

– the faster reduction of “red loans” and the liquidation of non-viable enterprises, which should facilitate the financing of sustainable,

-the gradual removal of capital controls based on relaxation steps, which have been described in the roadmap agreed by the Bank of Greece within time limits that depend on the degree of fulfillment of certain conditions,

– that pre-crisis levels of investment were at 20% of GDP, while in 2014 they dropped to 11.4% and now remain at 12.5%, indicating the significant margins to restore the ratio of investment to GDP to the long-term trend until the gradual reduction of the investment gap,

-the progress of structural reforms which is encouraging

– EIB and EBRD funding, which are very encouraging for 2018, with a funding of € 2 billion already in the first four months of the year against a year-on-year outturn for the year,

– and improving the investment climate…. / IBNA