Quarterly Report for the Greek Economy

4 - 2015

January 21st, 2016

This presentation is supported bySponsor of the issue

A milder than anticipated recession in 2015

• A relatively significant dynamic from 2014, that

gradually paid off

• Positive effect from certain reforms taken in the last 3

years• Led to a slight reduction in the unemployment rate

• Dynamic of exported goods

• Boosts from increase in tourism, reduction in

energy costs and beneficial exchange rates

• Capital controls were anticipated due to a prolonged

period of uncertainty • Consumption levels were kept at relatively high level, due to

preventative deposit withdrawals by households and firms, as well as from a delayed collection of certain taxes

A milder than anticipated recession in 2015

Negative developments during the previous year

Extreme uncertainty as concerns the continuation of funding and the outlook of the economy

• Recession deepens

• Destabilisation of the banking system

Capital controls had a significantly negative impact on the economy as a whole

• Controls will continue into the current year

• A lifting of the controls is only achievable through a thorough transition oft the Greek economy to a new phase of balance and reliability

Combination of effects on the economy in 2016

•A pivotal point is how fast will the evaluation be resolved

• Pressures on the disposable income of households (increases in tax levels and insurance contributions; depletion of withdrawn savings) – limitations on consumption possibilities

• A positive impact from energy costs, a relative increase dynamic in tourism

• Productive forces target out of Greece - increase in exported goods

• Increased variability on a European and International level

Combination of effects on the economy in 2016

• Investment continues to be a weak link

• Uncertainty with regard to the medium-term course of the

economy remains steady

• Banks are unable to contribute with significant funding

• The economy is still being overseen without a reliable exit

plan for the markets

If we do not experience any positive or

negative shocks, the economy will again

be in a recession in 2016

A strategic orientation of fiscal policy is imperative

Current pressing issues:

• Growth through attracting foreign investment

• A decisive increase in funding to producers of exported goods

• Easing of limitations which keep the economy excessively

regulated

Any alternative solutions which promise prosperity and an exit from crisis through short-term, tactical moves, without a decisive transformation, were proven in practice to be inexistent

A strategic orientation of economic policy is imperative

An exit from the crisis will be possible when it will become clear which should be the characteristics of the economy in a decade from now and when the relevant developmental plan will have widespread and stable political and social support.

The lack of a plan discourages medium-term and long-term investment.

Current decisions are heavily dependent on expectations about the future steady state. Economic policy should focus primarily on aligning and reinforcing expectations towards a specific growth path, as well as avoid managing individual issues in a way that generates confusion as regards the ultimate target.

Individual components of economic policy

• Social Security: A greater dependency between pensions and all contributions, so as not to burden future generations

• Taxation: Smart use of e-payment systems, a widening of the tax base, stability, transparency, simplicity

• Human capital, Education

• Institutions

• Public Debt: emphasis on low debt service cost, over a longer period of time

• Valuation of assets: increase from a potential

improvement of expectations

Prospects

•Whether the economy will remain in a prolonged period of stagnation, being at the same time vulnerable to external disruptions and threats, or take a growth path, critically depends on the reliability of economic policy and the decisiveness of the growth turn.

•Choices concerning individual economic policy areas should not deviate from or doubt the central policy target.

Quarterly Report Overview

Global Economy

• Forecasts for global growth of 3.0% and global trade increase of 3.3% in 2015.

• Initial predictions for an acceleration of global growth in 2016 to 3.6% are unlikely to come true

• Dangers: A rapid deterioration of the Chinese economy, deepening of recession in Brazil and Russia

• Stock markets turmoil

• Falling prices of oil and other raw materials (metals etc.) are negatively impacting the economies of producer countries

• Economic sentiment and expectations indicators: Significant deterioration in key economic zones internationally, with the most intense fall recorded in Asia

• Eurozone: +1.9 (2015), + 2% (2016)

Return to recession in 3Q/2015 (after 6 quarters of growth)

Drop in GDP (July – September 2015): -1.1% against +0.7% in 1Q/2015 and

Stagnation in the first 3 quarters of 2015 (+0.1%) instead of an increase of

0.6% in the corresponding period of 2014

Recession was caused by:

• Abrupt decline in investment (-27.0%, from the first half of 2015: -3.4%)

o Despite the highly uncertain political situation of the first 6 months, firms did not reduce fixed capital formation

o Reduction in fixed capital investments by €991 million in 3Q and simultaneously a large reduction in stocks (- €562 million)

• Extensive reduction of exports (-12.5%, from +2.3% in the first half of 2015:)

o Exclusively from a decline in exports of services (-25.0%), due to international transfers – other services

− Small increase in exported products (+0.7%), from higher exports of non-petroleum products

Return to recession…

Containment of recession by:

• A continued increase in domestic consumer spending

o Small increase in household consumption (+0.3% from +1.3% in the first half of 2015) and consumption of the public sector (+0.4% from -0.6% in the first half of 2015)

− Households were in part prepared for capital controls (withdrawal of deposits)

− Rehiring – discontinuation of public sector reforms led to an intensification in government expenditure

• Sheer reduction of imported goods (-20.0% against +2.7% in first half of 2015)

− An evidently stronger impact of capital controls on imports

o Decrease of external sector debt by 37.3% (national accounts approach) in the first 9 months of 2015 (1.4% of GDP)

Implementation of 2015 State Budget

• State Budget primary outcome: Surplus of €2.27 bn., against

a target of €3.26 bn. (in the 2016 budget)

• SB total balance: deficit of €3.53 bn., as opposed to aim of

€2.57 bn.

• SB revenue shortfall of €1.67 bn. against the relevant target in

the 2016 Budget.

− Uncollected revenues of €3.59 bn., from ANFA's & SMP's, which

were first included in the target in 2016 State Draft Budget

• Higher reduction of expenditure, by €713 mil.

− On the other hand, Government’s arrears were widened by €1.97

bn.

State Draft Budget 2016

• Only mild improvement in fiscal outcomes is required:

o Reduction of State Budget deficit by €1.31 bn. against

provisional results for 2015

o Increase of primary surplus by €1.43 bn. against last year’s

realisation

− Carry-over effect of previous July-August measures brings

enhanced revenues in 2016

− Reduced expenditure due to much lower debt amortisation (€13.1

bn. against €32.8 bn. in the previous year)

Medium-term developments– 4Q/2015

• New fiscal measures – discounting the negative consequences of other policies (social security, protection regime about borrowers, etc.) limited household consumption

Slight increase in private consumption in 2015 (0.4%), smaller than the year before last (0.7%).

• Increase of government expenditure from September, after regaining access to support programme funding, NSRF restart

Increase in public consumption between October-December, increase in 2015 (+0.5% against -2.4% in 2014)

Medium-term developments– 4Q/2015

• Pending social security reforms, liquidity squeeze, capital controls - bank recapitalisation

Postponement of investments -12.5% the previous year, against +9.8% in 2014

• Decline in exports, in 4Q due to a decrease in non-petroleum products - tourism revenue, as well as from negative base effect

First annual decline since 2009 (≈-5.0%)

• Slight slowdown in the decline of imports, from loosening of capital controls

decline ≈ -7.5%, equal to the increase of the year before last

Causes of a milder than expected recession in 2015

1)Increase in private consumption during the first half of 2015, due to a heightened

concern over the outcome of the prolonged negotiations with the lenders

2)Anticipation of restrictions in capital mobility, led to a withdrawal of deposits from a

large part of households and firms. This fact allowed for the slight increase in private

consumption to remain steady even after the introduction of capital controls.

3)No convulsive reactions after the imposition of controls, as the banking system and

a significant part of the private sector had been more or less prepared

4)Worse effect of capital controls on imports than on exports, improving the external

sector’s contribution to GDP

oThe tourism industry was untouched during this critical quarter

Considering the slight decline in GDP in 3Q/2015 due to the aforementioned

factors, the magnitude of 2015 recession is estimated at 0.5%

In addition, decline of the rate of unemployment…

A 1.5% decline in unemployment in 2015

•Continuation in 4Q/2015 of the reduction in unemployment from job creation in

the tourism industry, however milder than in the summer

•Part of the increase in employment in 3Q/2015 in the manufacturing and retail –

wholesale businesses, has been maintained in the next quarter

Unemployment rate at 25.0% in 2015, from 26.5% the previous year

De-escalation in deflation due to a VAT increase

•0.6% deflation in 4Q, against 1.7% in Jan.-Sept.

•A greater price increase in 4Q in food – non-alcoholic beverages, tobacco –

alcohol, as well as hotels – cafés – restaurants, whose prices were mostly

affected by the changes in VAT

• Restraint of further deceleration from a new reduction in the international

petroleum price

Marginal increase in industrial product during the 11 months of 2015

Sources: ELSTAT, Eurostat

January - November 2015: +0.1% against -1.9% in the corresponding period of 2014

Industrial Production Index

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Q1

20

05

Q2

20

05

Q3

20

05

Q4

20

05

Q1

20

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Q2

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Q3

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07

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08

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Q4

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08

Q1

20

09

Q2

20

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Q3

20

09

Q4

20

09

Q1

20

10

Q2

20

10

Q3

20

10

Q4

20

10

Q1

20

11

Q2

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11

Q3

20

11

Q4

20

11

Q1

20

12

Q2

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Q3

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12

Q4

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Q1

20

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Q4

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13

Q1

20

14

Q2

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Q3

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Q4

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14

Q1

20

15

Q2

20

15

Q3

20

15

Oct.

'1

5

No

v.

'15

Eurozone-18 Greece

Decline in retail trade in the first 10 months of 2015

Volume Index in Retail Trade (2010=100) and Business Climate Index in Retail Trade (1996-2006=100)

Volume Index: -30% against reference year (2010)

Jan. – Oct. 2015: -1.4% against Jan. – Oct. 2014: -0.3%

Sources: IOBE, ΕLSTΑΤ

40

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90

100

110

120

130

40

50

60

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80

90

100

110

120

130

Volume Index in Retail Trade(left scale) Business Expectation Index (right scale)

Contraction in many services branches in 2015 with the exception of tourism (+10%)

Sources: IOBE, ΕLSΤΑΤ

IT services: +9% against -5.4%

Turnover Index in Tourism (Accommodation and Food Service Industry)

Α Β C D Α Β C D Α Β C D Α Β C D Α Β C D Α Β C D Α Β C

2009 2010 2011 2012 2013 2014 2015

Indicator 59 109 171 75 61 98 158 63 48 96 157 51 39 80 146 42 32 84 148 58 47 90 159 70 49 102 175

0

20

40

60

80

100

120

140

160

180

200

Deceleration of recovery in the first 9 months of 2015

Production Index in Construction and Building Activity Indicator (quarterly y-o-y changes)

Sources: ELSTAT- Eurostat

Jan. – Sept. 2015: +0.3%

Jan. – Sept. 2014: +14.5%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

-80

-60

-40

-20

0

20

40

60

80

Q1 2

006

Q2 2

006

Q3 2

006

Q4 2

006

Q1 2

007

Q2 2

007

Q3 2

007

Q4 2

007

Q1 2

008

Q2 2

008

Q3 2

008

Q4 2

008

Q1 2

009

Q2 2

009

Q3 2

009

Q4 2

009

Q1 2

010

Q2 2

010

Q3 2

010

Q4 2

010

Q1 2

011

Q2 2

011

Q3 2

011

Q4 2

011

Q1 2

012

Q2 2

012

Q3 2

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Q4 2

012

Q1 2

013

Q2 2

013

Q3 2

013

Q4 2

013

Q1 2

014

Q2 2

014

Q3 2

014

Q4 2

014

Q1 2

015

Q2 2

015

Q3 2

015

Q4 2

015

Building Activity Indicator (Greece) Production Index (Greece) Production Index (Eurozone)

Improvement of economic sentiment in 4Q/2015 – Still, at a significantly lower level than that of the corresponding period of 2014

Sources: ΙΟΒΕ, European Commission

Economic Sentiment Indicator

Overall, the economic sentiment in Greece in 2015 has

deteriorated in comparison to 2014

50

60

70

80

90

100

110

120

De

c-0

4

Jun

-05

De

c-0

5

Jun

-06

De

c-0

6

Jun

-07

De

c-0

7

Jun

-08

De

c-0

8

Jun

-09

De

c-0

9

Jun

-10

De

c-1

0

Jun

-11

De

c-1

1

Jun

-12

De

c-1

2

Jun

-13

De

c-1

3

Jun

-14

De

c-1

4

Jun

-15

De

c-1

5

European Union Eurozone Greece Average, Greece (2001-2014)

Gradual correction of expectations after the summer shock, in all sectors. However, in relation to 2014, firms’ expectations have deteriorated noticeably in all sectors overall in 2015.

Source: ΙΟΒΕ

ConstructionIndustry

Retail Trade Services

-50-40-30-20-1001020

50

70

90

110

130

De

c-0

4Ju

n-0

5D

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05

Jun

-06

De

c-0

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n-0

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07

Jun

-08

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c-0

8Ju

n-0

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09

Jun

-10

De

c-1

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11

Jun

-12

De

c-1

2Ju

n-1

3D

ec-

13

Jun

-14

De

c-1

4Ju

n-1

5D

ec-

15

Industry Overall

Average (2001-2014)

Industry - Eurozone

-40

-30

-20

-10

0

10

020406080

100120

No

v-0

4M

ay-0

5N

ov-

05

May

-06

No

v-0

6M

ay-0

7N

ov-

07

May

-08

No

v-0

8M

ay-0

9N

ov-

09

May

-10

No

v-1

0M

ay-1

1N

ov-

11

May

-12

No

v-1

2M

ay-1

3N

ov-

13

May

-14

No

v-1

4M

ay-1

5N

ov-

15

Constructions Overall

Average (2001-2014)

Construction - Eurozone

-30-25-20-15-10-50510

0

20

40

60

80

100

120

140

De

c-0

4Ju

n-0

5D

ec-

05

Jun

-06

De

c-0

6Ju

n-0

7D

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07

Jun

-08

De

c-0

8Ju

n-0

9D

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09

Jun

-10

De

c-1

0Ju

n-1

1D

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11

Jun

-12

De

c-1

2Ju

n-1

3D

ec-

13

Jun

-14

De

c-1

4Ju

n-1

5D

ec-

15

Retail Trade Overall

Average (2001-2014)

Retail Trade - Eurozone

-30

-20

-10

0

10

20

30

40

60

80

100

120

De

c-0

4Ju

n-0

5D

ec-

05

Jun

-06

De

c-0

6Ju

n-0

7D

ec-

07

Jun

-08

De

c-0

8Ju

n-0

9D

ec-

09

Jun

-10

De

c-1

0Ju

n-1

1D

ec-

11

Jun

-12

De

c-1

2Ju

n-1

3D

ec-

13

Jun

-14

De

c-1

4Ju

n-1

5D

ec-

15

Sevices Overall

Average (2002-2014)

Services - Eurozone

Marginal deterioration of consumer confidence in 4Q/2015 -At a worse level than the previous year

Sources: ΙΟΒΕ, European Commission

Consumer Confidence

However, overall, the indicator was higher in 2015 than in 2014

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

De

c-0

4

Jun

-05

De

c-0

5

Jun

-06

De

c-0

6

Jun

-07

De

c-0

7

Jun

-08

De

c-0

8

Jun

-09

De

c-0

9

Jun

-10

De

c-1

0

Jun

-11

De

c-1

1

Jun

-12

De

c-1

2

Jun

-13

De

c-1

3

Jun

-14

De

c-1

4

Jun

-15

De

c-1

5

European Union Eurozone Greece Average, Greece (2001-2014)

Unemployment at a three-year low

Number of unemployed in Greece, 1Q/2008-3Q/21015

Unemployment reached 24.6% in 3Q/2015 against 25.5% in 3Q/2014

Employment increased in 10 sectors: Indicatively: Tourism (+8.4%), Retail and Wholesale Trade (+7.4%), Manufacturing

(+9.9%), Real Estate Activity (+17%)

By contrast, unemployment decreased in 11 sectors: Indicatively: Mines and quarries (-14.9%), Construction (-7%),

Power Supply (-5.5%), Agriculture, Forestry and Fishing (-4.6%).

418,60366,70364,0

402,20

476,70455,60477,90

528,60

600,20604,60631,90

720,80

799,60815,60

883,50

1028,60

1119,101163,0

1218,40

1279,90

1336,01327,901320,301337,201342,30

1280,101229,401245,90

1272,50

1180,101160,50

0

200

400

600

800

1.000

1.200

1.400

1.600

Decline in the deficit in the trade account in 2015 (Jan. –Oct.) by 16.4%

January – October 2015:

Exports : -5.5% (€21.2 bn., incl. fuels)

• +9.2% (€14.8 bn., excl. fuels)

Imports: -10.1% (€35.4 bn.)

Trade deficit: -16.4%

Intense decline: Fuels (-27.8%)

Increase: Agricultural Goods (14.8%), Industrial Goods (7.9%) and Raw Materials (0.8%)

Markets:

Losses: Turkey (46.8%), Estonia (11.6%), Ukraine(24.1%), Bulgaria (5.1%), Russia (42.7%), Tunisia(4.,6%), U.A.E. (28.1%), Libya (20.9%), China (18.5)

Increases: Ε.Ζ.(15.2%), EU-28 (12.4%), N. America(49.8%), Cyprus (12.3%), Italy (23.1%), UnitedKingdom (13.7%), Denmark (27%) Egypt (24.9%),Lebanon (37.4%), S. Korea (37.7%), Germany(4.1%), Belgium (12%)

Jan. – Oct. 2015 (ELSTAT estimations)

Exports: -5.1% (€21.5 bn.)

Imports: -9.7% (€36.2 bn.)

Trade deficit: -15.7%

€,0

€10000,0

€20000,0

€30000,0

€40000,0

€50000,0

€60000,0

2008 2009 2010 2011 2012 2013 2014 2015

Mil.

€

DEFICIT IMPORTS EXPORTS

Current account surplus of €2.3 bn. in the 10-month period of 2015, mainly due to the dip in imports

Current Account Balance, January-October 2009-2015

Source: Bank of Greece

Decrease in imported goods and services between Jan. – Oct.

by 14.2% (-€7.3 bn.)

Decrease in exported goods and services by 7.6% (- €3.8 bn.)

-22.496,0-20.993,0

-16.346,0

-5.230,0

-1.916,0-403,0

2.271,0

-25.000

-20.000

-15.000

-10.000

-5.000

0

5.000

2009 2010 2011 2012 2013 2014 2015

mil.

€

Current Account Balance

The food industry/sector had an import share loss in the July – November period, whereas the export share Agriculture was the one that mostly declined

Sources: Eurostat, data processing by ΙΟΒΕ

Changes by industry/sector (imports-exports) period 2014-2015

(July - November)

There was a simultaneous increase in the corresponding share of

exports In the food industry for the same period in 2015

-1,1

-1,0

-0,7 -0,7

-0,5

-1,2

-1,0

-0,8

-0,6

-0,4

-0,2

0,0

10

-Fo

od

24

- M

etal

s

29

- V

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icle

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20

- C

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mic

als

27

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ical

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ar

Imports

-1,6

-1,2

-0,5 -0,5 -0,4

-1,8

-1,6

-1,4

-1,2

-1,0

-0,8

-0,6

-0,4

-0,2

0,0

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14

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20

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21

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38

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g

Exports

Deceleration of deflation

• The price drop of 2015 wasthe largest of at least thelast 55 years.

• Price decreases in housing(-6.5%) and transport (-4.4%) were the largestamongst the variouscategories of goods andservices included in H.I.C.P.

However, in past December, the Harmonised Index of Consumer Prices

increased, for the first time in 2015

-3

-2

-1

0

1

2

3

4

5

6

No

v-1

0

Ja

n-1

1

Ma

r-1

1

Ma

y-1

1

Ju

l-1

1

Sep

-11

No

v-1

1

Ja

n-1

2

Ma

r-1

2

Ma

y-1

2

Ju

l-1

2

Sep

-12

No

v-1

2

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Sep

-13

No

v-1

3

Ja

n-1

4

Ma

r-1

4

Ma

y-1

4

Ju

l-1

4

Sep

-14

No

v-1

4

Ja

n-1

5

Ma

r-1

5

Ma

y-1

5

Ju

l-1

5

Sep

-15

No

v-1

5

%

Eurozone Greece

HICP trend

Medium-term developments

• Challenges from the new Programme implementation

o Implementation of reforms on Social Security System and Taxation

o Negotiation for the debt

o Structural changes to sectors (OECD as well as restructuring of loans)

o Privatisations – Transition to new fund

Necessary intergovernmental cooperation – fast coordination for the application of reforms without a prolonged adaptation period

A completion of the current evaluation & conversation about debt will curb uncertainty decidedly; primarily, they will provide access to the ECB’s main liquidity mechanism

• Consequences of fiscal consolidation - reforms

o Reduction of households’ disposable income due to social security reforms

o Higher direct taxes – insurance contributions of firms

o Containment of construction activity, in view of changes in property taxes

Medium-term developments

Banking system in a transitionary phase

• Successful recapitalisation – capital needs are significantly lower than estimated by the

July 12th agreement

• Pending the implementation of new framework for the protection of (loan) borrowers

• Deposits at a low level reliability has not recovered

• For a return of deposits and in order to regain access to the ECB’s main mechanism,

there needs to be progress in Programme implementation Facilitation of credit supply,

acceleration of loosening and lifting (in the medium-term) of capital controls

Increase in available funds – boost to liquidity outside the banking system from:

• Public Investments Programme payments at €4.2 bn in 4Q/2015

• Increase in the PIP for 2016 (+ €350 mil.) - frontloaded implementation

• Νο broadening of the government’s arrears – acceleration of their repayment

Medium-term developments

Additional factors that will influence investments

o Low energy costs

o Geopolitical developments in the wider region

External sector

Exports

o Curbing of exports excl. ships – petroleum products by the end of 2015

o Further significant increase in tourism revenues is not most possible

o Weakening of the negative impact of petroleum products

o Acceleration of growth in major markets (e.g. Eurozone – USA)

Imports

o Mild weakening of capital controls’ impact during the current year

o High import level in the first half of 2015 (as a basis for comparison for 2016)

2016 Forecasts

• Decrease of private consumption as a result of measures

– uncertainty with regard to social security changes–

income tax – protection of borrowers (≈ -2.0%)

• Reduction in government expenditure as a result of the

restart of fiscal adjustment (≈ -3.0%)

• Postponement in investments (≈ -4.0%) due to :

o Prolonged negotiations

o Relatively limited investment sources (excl. PIP)

o Pending reforms in social security system - taxation

o Changes in real estate property taxation

2016 Forecasts

•Increase of exports due to demand from developed economies (Eurozone - USA), decline in downward effects of oil products (≈ +2.0%)

• New decrease of imports, due to fall in consumption demand – investment, as well as from conjectural spending in the first half of 2015 (≈ -3.5%)

2016: Slight deepening of recession, to ca.1.5%

2016 Forecasts

Slight increase in unemployment

Impact of the reduction in private consumption on employment in sectors producing goods – services for final consumers (Retail Trade and Food Service Activities)

Slight or no further increase in Tourism

Construction: Increase in Public Works – decrease in building

Increase in unemployment by 0.5% in 2016 (25.5%)

Mild inflation, after three years of price drops Due to increase in VAT

Containment of inflationary pressures due to new decline in the price of petroleum

0.5-1% increase in the Consumer Price Index

ELECTRONIC MEANS OF PAYMENT AND BOOSTING OF TAX REVENUE ΙΝ GREECE

IOBE Study Presentation:

Study scope

To investigate the role of the electronic means of payment in reducing shadow economy and boosting tax revenue

To quantify the impact on tax revenue from incentivising the use of electronic means of payment in retail transactions

Electronic

Means of

Payment (EMP)

Payment Cards

Electronic Money

Credit Transfers

Direct Payment Commands

Greece ranks in one of the last positions in the EU-28 in terms of EMP usage

0

50

100

150

200

250

300

350

400

450

500

Gre

ece

Ro

man

ia

Bu

lgar

ia

Mal

ta

Ital

y

Po

lan

d

Cyp

rus

Hu

nga

ry

Cze

ch R

epu

lic

Slo

vaki

a

Lith

uan

ia

Cro

atia

Spai

n

Latv

ia

Irel

and

Slo

ven

ia

Po

rtu

gal

EU-2

8

Fran

ce

Ger

man

y

Bel

giu

m

Esto

nia

Au

stri

a

Un

ite

d K

ingd

om

Den

mar

k

Net

her

lan

ds

Swed

en

Fin

lan

d

Luxe

mb

ou

rg

Source: Member banks of the Hellenic Bank Association, Data Processing: ΙΟΒΕSource: ECB

The Bank holiday gave a strong push to e-payment methods, however

there is still much room for an increase in their use

99 10091

203

177 176

100

205

178

194

0

50

100

150

200

250

June/15 July/15 August/15 September/15In

dex

(10

0=J

un

e 2

01

5)

Value per transaction Total value

Number of transactions

Domestic sale transactions with payment cardsNumber of digital payments per inhabitant (2013)

Consumer distrust and fragmented entrepreneurship restrict domestic use of EMP

• Lack of trust by consumers

• Fragmented entrepreneurship

• Other factors (economic crisis, benefits from tax evasion)

Measurable factors

• The value of EMP use for consumers is low when their penetration among merchants is low and vice versa

Network effects • Paying is a daily

repetitive action, governed by habits

• EMP diffusion is stabilised at low levels

Habits

The effect of the measurable factors is reinforced by network effects and

the power of habit

EMP limit shadow economy and have an effect on GDP through catalytic effects

• The positive effect of EMP on tax revenues is proven through empirical analysis of data for the Greek economy.

• For each increase of payment cards use by one percentage unit, tax revenues are estimated to have increased by 0.24% for the period 2000 – 2013.

Boost GDP

Limit shadow economy

Limit transaction

costs

Stimulate the creation of

new servicesStrengthen

market competition

Increase consumption

Source: Zandi και Singh (2010, 2013), The Impact of Electronic

Payments on Economic Growth. Moody’s analytics.

The need to limit tax evasion has led to the adoption of measures to boost usage of EMP internationally

Use of e-transactions

Lotteries

Ban on use of cash

Income tax rebate

Fight against tax evasion

Discounts on transaction

value

Based on econometric analysis of

transaction data from a random and

anonymous sample of 40 thousand people,

it emerges that the motives offered by

domestic banking institutions are positively

associated both with the frequency of card

use, as well as with value per transaction.

The implementation of appropriate measures could lead to a significant boost in tax revenues

Policy instrument Conservative Main Optimistic

1% refund 47 248 610

5% refund -1 79 182

10% refund -10 90 183

EMP lottery in high-risk

sectors 6 72 153

POS in utilities 0 2 5

POS in small shops -14 124 297

Ban on cash in high-risk

sectors16 82 163

Total 46 696 1594

Net fiscal impact per scenario and policy instrument (€ mil.)

Source: ΙΟΒΕ

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