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Greek Economy: Better sentiment…but what about growth?
1 October 2019
Economic Research & Investment Strategy
Speaker: Ilias Lekkos
The story that we all want to forget - But we shouldn’t
Source: ELSTAT, Piraeus Bank Research
Real GDP increased by 1.9% in 2018
Private Consumption increased by
1.1% in 2018 supporting growth
Public Consumption has remained stable
at approx. €40 bn since 2013
Investments backtracked in 2018 Imports have increased, returning to
their 2004 level
Exports at record high in 2018
3
2001 €131bn 2017
€ 128bn
2018€ 130bn
90
100
110
120
130
140
150
160
170
180
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Private Consumption Long term average
2004 €68bn 2017
€65bn
2018€67 bn
10
20
30
40
50
60
70
80
90
100
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Imports of goods and services Long term average
2017 €60bn
2018€65bn
10
20
30
40
50
60
70
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Exports of goods and services Long term average
Source: ELSTAT, Bank of Greece, Piraeus Bank Research
Real GDP (annual % change)
Manufacturing (annual % change) positive since 2014, on a
stable c3% growth since 2016
Retail Sales, excl. automotive fuels
(annual % change), sustained single-digit growth since 2016
Current Account Balance (% of GDP)
still in deficit Employment (annual % change) after a sharp decline,
employment has been expanding by 2%.
-16.0
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Current Account balance (as % of GDP)
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Retail Volume Index (excl. auto fuels) - % change
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
IPI Manufacturing (% change)
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Εmployed (% change)
2019 f1.6%
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19 f
Real GDP (% change)
What is the current state of the Greek Economy?
4
Source: European Commission DG ECFIN, Piraeus Bank Research
Economic Sentiment Indicator, ESI
Industrial Confidence Indicator Confidence Indicator in Retail Trade
Confidence Indicator in Constructions
Confidence Indicator in ServicesConsumers: General economic situation over next 12 months
Sept
60.0
70.0
80.0
90.0
100.0
110.0
120.0
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
Jan
-16
Jul-
16
Jan
-17
Jul-
17
Jan
-18
Jul-
18
Jan
-19
Jul-
19
ESI
Sept
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
Jan
-16
Jul-
16
Jan
-17
Jul-
17
Jan
-18
Jul-
18
Jan
-19
Jul-
19
Industrial Confidence Indicator
Sept
-60.0
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
Jan
-16
Jul-
16
Jan
-17
Jul-
17
Jan
-18
Jul-
18
Jan
-19
Jul-
19
Confidence Indicator in Services
Sept
-60.0
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
Jan
-16
Jul-
16
Jan
-17
Jul-
17
Jan
-18
Jul-
18
Jan
-19
Jul-
19
Confidence Indicator in Retail Trade
Sept
-100.0
-80.0
-60.0
-40.0
-20.0
0.0
20.0
40.0
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
Jan
-16
Jul-
16
Jan
-17
Jul-
17
Jan
-18
Jul-
18
Jan
-19
Jul-
19
Consumers: General economic situation over the next 12 months
Sept
-90.0
-80.0
-70.0
-60.0
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
Jan
-16
Jul-
16
Jan
-17
Jul-
17
Jan
-18
Jul-
18
Jan
-19
Jul-
19
Confidence Indicator in Constructions
sa data
sa data
sa data
sa data
sa datasa data
What has been the impact of the new government?
5
Source: Piraeus Bank Research 6
Piraeus Bank Corporate ex-Financials Bond Index: Despite the market’s appetite for
high-yielding bonds, the cost of debt of the Greek corporate bond market has remained
relatively stable in recent years.
Piraeus Bank Sovereign Bond Index: The upward trend in Greek government
bonds continues, with a new low recorded for the Piraeus Bank Index at 1.29%.
1.52.02.53.03.54.04.55.05.56.06.57.07.58.08.59.09.5
10.010.511.011.512.012.513.013.514.014.5
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-1
3Ja
n-1
4M
ar-1
4M
ay-1
4Ju
l-1
4Se
p-1
4N
ov-
14
Jan
-15
Mar
-15
May
-15
Jul-
15
Sep
-15
No
v-1
5Ja
n-1
6M
ar-1
6M
ay-1
6Ju
l-1
6Se
p-1
6N
ov-
16
Jan
-17
Mar
-17
May
-17
Jul-
17
Sep
-17
No
v-1
7Ja
n-1
8M
ar-1
8M
ay-1
8Ju
l-1
8Se
p-1
8N
ov-
18
Jan
-19
Mar
-19
May
-19
Jul-
19
Sep
-19
Wei
ghte
d Y
tM (
%)
0.01.02.03.04.05.06.07.08.09.0
10.011.012.013.014.015.016.017.018.019.020.021.022.023.024.025.026.027.0
Jul-
12
Sep
-12
No
v-1
2Ja
n-1
3M
ar-1
3M
ay-1
3Ju
l-1
3Se
p-1
3N
ov-
13
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-1
4Ja
n-1
5M
ar-1
5M
ay-1
5Ju
l-1
5Se
p-1
5N
ov-
15
Jan
-16
Mar
-16
May
-16
Jul-
16
Sep
-16
No
v-1
6Ja
n-1
7M
ar-1
7M
ay-1
7Ju
l-1
7Se
p-1
7N
ov-
17
Jan
-18
Mar
-18
May
-18
Jul-
18
Sep
-18
No
v-1
8Ja
n-1
9M
ar-1
9M
ay-1
9Ju
l-1
9Se
p-1
9
Wei
ghte
d Y
tM (
%)
The positive sentiment has been transmitted to Greek Financial assets
Source: ELSTAT, European Commission DG ECFIN, Piraeus Bank Research
Economic Sentiment Indicator (ESI) (index, 1990 -2018 =100)
vs Real GDP growth rate
Consumer & business expectations support a steady economic
climate in H2, showing an improvement in July - August
Business Confidence Indicator1
Consumer Confidence Indicator2
1. Index 1990 – 2018=100. The methodology is based on DG Ecfin Business & Consumer surveys.
2. arithmetic means of answers (seasonally adjusted balances, which are the difference between positive and negative answering options, measured as percentage points of total answers) to a selection of questions
sa data
sa data
sa data
The key issue for 2020 is whether hard-data will follow business and consumer sentiment…
7
Source: Eurostat, ELSTAT, Piraeus Bank Research
Industrial Production Index decelerating
trend, but still on a positive trajectory
sa datasa data
sa data
Turnover Index in Services (excl. trade &
vehicles) in an expansionary trajectory
Turnover Index in Retail Sales (excl. automotive
fuels) captures the decline of private consumption
Turnover Index in Wholesale Trade marginally negative growth rate in Q2
nsa data
Total Building Permits Strong fluctuations
Drivers of Real GDP growth rate (annual % change, unless otherwise stated)
2.1%
1.0%
-2.1%
-13.8
4.3%
8.9%
-2.5%
€ -0.9 bn
1.5%
-0.1%
1.9%
7.6
0.7%
4.8%
6.7%
€ -1.6 bn
Real GDP
Private
Consumption
Public
Consumption
Gross Capital
Formation
Gross Fixed
Capital Formation
Exports
Imports
External
trade
H1.2018 H1.2019
sa data
…but the “hard” data are still on the “soft” side
8
Source: ELSTAT, MinFin (Stability Program 2019), Piraeus Bank Research
It’s difficult for both households and the state to be net savers at the same time
10
General Government Primary Balance (based on Enhanced
Surveillance definition, % of GDP)
2018 is the fourth year that Greece over-achieves its fiscal targets
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Q1
.03
Q3
.03
Q1
.04
Q3
.04
Q1
.05
Q3
.05
Q1
.06
Q3
.06
Q1
.07
Q3
.07
Q1
.08
Q3
.08
Q1
.09
Q3
.09
Q1
.10
Q3
.10
Q1
.11
Q3
.11
Q1
.12
Q3
.12
Q1
.13
Q3
.13
Q1
.14
Q3
.14
Q1
.15
Q3
.15
Q1
.16
Q3
.16
Q1
.17
Q3
.17
Q1
.18
Q3
.18
Q1
.19
Gross Saving Ratio 1 (% of Household Disposable Income, 4Q ma)
this negative savings gap has been decreasing, but not fast enough
for the households’ saving ratio to turn positive
1. Gross Saving Ratio=HDI−FC
HDI=
Gross SavingsHDI
Eurozone: Growth Outlook deteriorates
Source: Eurostat, IHS Markit, Piraeus Bank Research 11
Industrial Production Index (annual % change, 3M ma) Industrial Production declines in Europe led by Germany
Real GDP Growth Rate (annual % change) the economic activity of Greece’s trading partners of seems to slow down severely
Investments & Net Capital Stock (€ bn)
For 2% average GDP growth we need to “crowd-in” € 325 bn of investments.
Non Financial Corporations Net vs
Gross Fixed Capital Formation (€ bn, current prices)
Source: ELSTAT, Piraeus Bank Research
A substantial investment gap that needs to close
13
EBITDA margin Total liabilities to equity Net debt to EBITDA
Dormant “Animal Spirits” drive defensive corporate balance-sheets to extremes.
Source: ICAP DATA.Prisma, Piraeus Bank Research 14
Greek corporates with sound fundamentals but no leverage
Source: Bank of Greece, Piraeus Bank Research
Corporate Loans (net flows, bn €) 1,2
Corporate Loans (annual % change) 1,2
Corporate Loans by sector (net flows in € mn & growth rates) 1,2
positive net flows in the majority of the sectors
1. The outstanding amounts include loans, holdings of corporate bonds and securitized loans serviced by credit institutions. Including credit extended by the Bank of Greece. As of December 2016, loans of the Consignment Deposits and Loan Fund are excluded from the domestic credit as the institution has been reclassified from the financial sector to the general government sector. As of March 2019 loans to shipping companies which have their registered office abroad are no longer included in credit to the domestic economy.
2. Net flows and growth rates are calculated taking into account reclassifications and transfers of loans/corporate bonds, write-offs and exchange rate variations.
15
that Greek banks are starting to support once again
Source: Bank of Greece, Piraeus Bank Research
1. Office Price Index
Residential Real Estate Prices (annual % change)on a clear recovery path
Real Estate FDI in Greece (cumulative annual flows, mn €)increased interest from abroad
Q2.197.7%
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Q1
.07
Q3
.07
Q1
.08
Q3
.08
Q1
.09
Q3
.09
Q1
.10
Q3
.10
Q1
.11
Q3
.11
Q1
.12
Q3
.12
Q1
.13
Q3
.13
Q1
.14
Q3
.14
Q1
.15
Q3
.15
Q1
.16
Q3
.16
Q1
.17
Q3
.17
Q1
.18
Q3
.18
Q1
.19
H2.186.4%
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
H1
.11
H2
.11
H1
.12
H2
.12
H1
.13
H2
.13
H1
.14
H2
.14
H1
.15
H2
.15
H1
.16
H2
.16
H1
.17
H2
.17
H1
.18
H2
.18
Non Residential Real Estate Prices1 (annual % change)increased by 7.0% in 2018
16
Finally, commercial and residential Real Estate sectors recover…on the back of record FDI inflows
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