Greece today: The Return of Optimism George P. Zanias Chairman, - PowerPoint PPT Presentation

Greece today: The Return of Optimism George P. Zanias Chairman, Hellenic Bank Association National Bank of Greece

Why be optimistic? 1. Fiscal and external imbalances corrected 2. Growth returned, on a q-o-q basis. Soon on y-o-y basis 3. There is strong growth potential 4. Banks restored strength 5. Risks contained  Public Debt  Socio – political risks  Commitment to reforms Page 1

Corrected Fiscal Imbalances Page 2

General Government Fiscal Primary surplus Balance 2013: 0.8% GDP and an over 6 6 % GDP performance of 0.5% of GDP at a State Budget 0 0 level in 8M:2014 -6 -6 -12 -12 -18 -18 2007 2008 2009 2010 2011 2012 2013 2014f Primary balance Cycl. adjusted primary balance Total G. Government balance Source: IMF, MinFin Page 3

Improvement in total fiscal Government balance -1 -3 -5 -7 Gov. balance -9 (2009) -11 Gov.balance % GDP -13 (2013) -15 -17 UK Greece Ireland Spain Portugal Cyprus Page 4

Corrected External Imbalances Page 5

Current account balance 4 % GDP 2 0 -2 -4 -6 -8 -10 -12 -14 -16 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014:H1 Euro area Greece Page 6

Nominal exports & imports of goods and services 40 % GDP 35 30 25 20 15 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014:H1 Exports nominal (% GDP) Imports nominal (% GDP) Page 7

Real effective exchange rate (based on unit labour costs) 150 150 2009-2013 : 140 Index 2001=100 140 -21% 130 130 120 120 110 110 100 100 90 90 80 80 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Ireland Spain Portugal Germany Greece Source: European Commission Page 8

Return to Growth Page 9

GDP growth - y-o-y and s.a. q-o-q % 8 GDP Q2.2014: 10 -0.3% yoy +0.5% qoq, s.a. 5 3 0 -2 -5 -7 -10 -12 -15 2001:Q2 2002:Q1 2002:Q4 2003:Q3 2004:Q2 2005:Q1 2005:Q4 2006:Q3 2007:Q2 2008:Q1 2008:Q4 2009:Q3 2010:Q2 2011:Q1 2011:Q4 2012:Q3 2013:Q2 2014:Q1 2014:Q4 GDP (q-o-q, right axis) GDP growth (left axis) Page 10

Why “+” in economic activity • Uncertainly contained / confidence indicators rising • Liquidity conditions improving • Absorption of structural funds improving • Better than expected tourism season • Structural reforms working • The crisis brought opportunities • Hitting targets Page 11

Significant Growth Potential Page 12

…. Significant growth potential • Competitive advantage in a number of sectors • Large development stock released by reforms • Access to significant structural funds with minimal national contribution • Significantly reduced labour cost • Labour supply not a constraint to high long term growth rates Page 13

Reforming for growth… • “ Adjustment Progress indicator ” (Berenberg & Lisbon Council) - Greece ranks 1 st in 2012 and 2013 • “ Product Market Regulation ” indicator (OECD) from 2008 to 2013 - 5 positions improvement - Greece is the country with the biggest improvement Page 14

Reforming for growth (continued) • “ Doing business ” (World Bank) from 2009 to 2013 improvement by - 97 positions in “starting a business” - 70 positions in “protecting investors” - 24 positions in the “ease of doing business” - 9 positions in “paying taxes” Page 15

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Banks Restored Strength Page 17

Restored strength through:  Surviving one real and two “virtual” stress tests  Consolidating/exploiting synergies  Cost cutting (including significant reduction in the cost of deposits)  Two rounds of capital rises  Implementing restructuring plans Page 18

Well equipped to address remaining challenges: ECB stress tests   the more the dynamic elements in the test the better  significant capital buffer/more in Restructuring Plans  NPLs  still rising but decelerated  provisions coverage > 50%  capital buffer (CET1 > 16%, CRD IV > 10%)  capital actions in Restructuring Plans  collateral in NPLs  economy starts growing  profitability improving  HFSF buffer funds Page 19

Key Risk Factors Contained Page 20

• Social and political stability : remarkable resilience despite high cost of adjustment • Commitment to reform : breaking taboos - Severe cuts in wages/pensions - Labour market flexibility - Dismissing public sector employees - Attacking vested interests (closed professions etc) - Privatisations Page 21

The unique characteristics of the Greek debt High nominal debt but:  In NPV terms Greek debt is far more manageable  Average residual maturity of Greek debt exceeds 16½ years. (2.5 times longer than the euro area average)  Redemption profile and debt servicing costs reasonably low until 2022  87% of Greek public debt is currently held by the “official sector”  Even “soft/indirect” types of OSI strengthen long -term debt sustainability  Significant growth potential  Privatisations Page 22 Source: Greek PDMA, IMF

Public Debt: Interest payments and redemptions 16 9 % GDP 8 14 7 12 6 10 5 8 4 6 3 4 2 2 1 0 0 2007 2009 2011 2013 2015f 2017f 2019f Redemptions (left axis) Interest payments (right axis) Page 23

Summarising …  economy fiscally stabilised  external imbalances fixed  economic recession turned into growth  public debt characteristics are unique  potential growth is significant  banking sector restored strength  remaining risks are contained Page 24

Thank you for your attention Page 25