Greece after the MOU Reforms, challenges and opportunities 03/12/2018
Reforms – The progress so far 2009 2017 Fiscal position, % of GDP -15,1% +0,77% Balance of payments position, % of GDP -9,8% -1,1% Real unit labour costs, 1999=100 110 99 Shadow economy, % of total 25% 21,5% Trading Across Borders* 70 31 Dealing with Construction Permits* 45 39 Starting a Business* 133 44 European Commission AMECO database, *Doing Business Rank: Best = “1”, Schneider 2018 for shadow economy.
Investment picks up, but there is a large investment gap Investment gap, % of GDP 4 pp + €50 billion 7.5 pp + €100 billion Deloitte computations for SEV
Low asset value – Competitive job market Bank of Greece, European Commission AMECO, Economic Adjustment Programmes for Greece Reviews (* includes imputed social security contributions), WEF Global Competitiveness Index, Capital.gr, ATHEX site, ECB.
Exports increase 2016 2017 %Δ (€ mil. current prices) Exports of manufactured goods increase Manufactured products 15,548.3 16,858.7 +8.4 of which: Food / Beverages 3,141.4 3,261.2 +3.8 Non-manufactured products 3,018.5 3,023.2 +0.2 Oil exports 6,896.7 8,979.8 +30.2 Total 25,463.5 28,861.7 +13.3 2017 Food, beverages Other products and tobacco 4,251.0 5,641.7 14.7% 19.5% Chemicals 3,071.2 10.6% Mineral fuels 8,979.8 31.1% Basic metals 2,713.2 9.4% Machinery and Transport Textiles and clothing Equipment 1,605.9 2,598.8 5.6% ELSTAT, * SEV estimate based on ELSTAT and EUROSTAT International Trade Data 9.0%
Remaining challenges and legacies (2017) Greece EU28 Overtaxation Average tax wedge, employee with €50K annual take home pay 58,0% 51,0% Disinvestment Net fixed capital formation, % GDP -4,6% 3,4% Legacy of a depression NPEs as % of exposures (2009 NPL) 47,6% 3,9% Difficult and expensive private Interest rate on new business loans. Loan value up to € 1mio 5,3% 2,3% sector access to finance Corporate sector is small Compensation of employees by corporations, % of GDP 15,0% 33,5% Large share of micro Employment in businesses with less than 10 employees, % total 57,3% 29,8% enterpreneurship business employment Large (and inefficient) public sector Compensation of employees, General Government, % of GDP 12,1% 9,9% High pension expenditure Pension expenditure % of GDP 16,6% 11,5% Low productivity (2009=100) Real labor productivity per hour worked 91,0% 108,9% Low employment Employment 15-64Y , total economy, % of population 15-64Y 53,5% 67,7% Trade deficit (goods) Exports of goods minus imports of goods, % of GDP -11,9% 0,6% European Commission AMECO database, Eurostat, SBA Factsheet, ECB, Taxes in Europe Database & OECD Taxing Wages, Bank of Greece, Greek General Government Budget Execution Bulletin, Bank of Greece. Tax wedge with SSCs.
Bilateral business ties – trade and investment Greek exports to Germany 2017 (€2 bil.) Oils, 2.82% Other, 2.30% Fuels, 3.55% Beverages and tobacco, 3.56% Other Food, 30.51% manufactured goods, 9.66% Machinery, 12.95% According to the BoG database Germany is holder of the single largest FDI position in Manufactured materials, 18.67% Greece. Chemicals, Key investors: Deutsche Telekom, Fraport. 15.98% Eurostat (trade by SITC), Bank of Greece database for FDI stocks.
Conclusion - The country has accomplished a tremendous adjustment The way forward: • Safeguard political & fiscal stability • Advance structural reforms and privatizations • Improve the business environment • Facilitate the digital transformation of the economy • Safeguard labour market flexibility & align pay with productivity • Take advantage of pro-Europe public sentiment among political parties and society
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