02 GREEK ECONOMY & OUTLOOK Can the New Government Revive the Greek “Animal Spirits”?
02 2.1 ECONOMIC RECOVERY Since 2017, the Greek Economy has been Range-bound Between 1.5%-2.0% 2019e 1.6% Source: ELSTAT, Piraeus Bank Research 2 | GREEK ECONOMY & OUTLOOK
02 2.2 NEW GOVERNMENT’S PLAN The New Government’s Plan to Reach “Escape Velocity” Investment “Shock” € 4bn Fiscal Stimulus Escape Velocity €6 0bn €0.5 bn corporate tax rates cut in 2-years 4.0% Real GDP = € 4.0bn tax revenues Special incentives (doubling of the time for €0.45b n dividend tax rate cut Efficiency Savings € 2bn offsetting losses, 200% over-depreciation €2.6bn personal income tax rate cut (up new investments) € 0.2bn public consumption spending cut to €10,000) € 12bn in infrastructures € 1.19bn rationalization & improvement in €0.8b n increase in the tax free income DEKO & General Government Legal Entities threshold by €1,000 for each child € 20- € 25bn in tourism and shipping € 0.14bn interest payments cut for T-bills €1.02b n VAT rate cuts € 15- € 20bn in primary sector and food € 0.15bn no public sector wage increase processing manufacturing €0.3b n business fee gradual abolishment € 0.3bn hiring / retirement ratio (1/5) €9bn in energy and the environment €0.4b n special solidarity levy gradual cut € 0.02bn unused real estate exploitation €0.4b n ENFIA (property tax) cut in 2-years €10bn in R&D, Industry, logistics and PPP €6 bn €6 bn Fiscal Neutrality Source: ND Elections 2019 Programme, Piraeus Bank Research 3 | GREEK ECONOMY & OUTLOOK
02 2.3 INVESTMENTS ENVIRONMENT For 2.0% Average GDP Growth we Need to “Crowd - in” € 325bn of Investments Non Financial Corporations Investments & Net Capital Stock ( € bn) Net vs Gross Fixed Capital Formation ( € bn, current prices) 20.0 1990 - 1999 2000 - 2008 2009 - 2018 2019 - 2027 15.0 10.0 5.0 0.0 Disinvestment -5.0 through depreciation -10.0 Capital Capital Capital Capital Stock 1989 Stock 2027 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Consumption GFCF GFCF GFCF GFCF Consumption Consumption Consumption Gross Fixed Capital Formation Net Fixed Capital Formation Source: ELSTAT, Piraeus Bank Research 4 | GREEK ECONOMY & OUTLOOK
02 2.4 ANIMAL SPIRITS But after a Long Recession “Animal Spirits” are Dormant Source: EC DG ECFIN, Piraeus Bank Research 5 | GREEK ECONOMY & OUTLOOK
02 2.5 GREEK CORPORATES (i) Despite Popular Belief, Greece has a Substantial “Bankable” Corporate Universe a outperformers (7.9%) 668 good performers b (35.5%) 2,985 c medium performers 3,477 (41.3%) d underperformers 1,289 (15.3%) Source: ICAP DATA, Piraeus Bank Research 6 | GREEK ECONOMY & OUTLOOK
02 2.6 GREEK CORPORATES (ii) Dormant “Animal Spirits” Drive Defensive Corporate Balance -sheets to Extremes EBITDA margin Total liabilities to equity Net debt to EBITDA d. 3.6 d. 25.0 d. -8.1% c. 2.8 c. 13.6 Total c. 7.1% Total Total b. 1.2 b. 3.8 b. 14.7% a. 0.5 a. 0.1 a. 24.9% d. 4.0 d. 26.4 d. 1.8% c. 3.6 c. 11.6 c. 6.9% Large Large Large b. 1.2 b. 4.1 b. 13.0% a. 0.7 a. 2.2 a. 33.0% d. 3.6 d. 24.9 d. -8.3% c. 13.7 c. 2.7 c. 7.1% SMEs SMEs SMEs b. 1.2 b. 3.8 b. 14.8% a. 0.1 a. 0.5 a. 24.7% 0 10 20 30 0 1 2 3 4 -20% -10% 0% 10% 20% 30% 40% Source: ICAP DATA, Piraeus Bank Research 7 | GREEK ECONOMY & OUTLOOK
02 2.7 CREDIT ENVIRONMENT But Corporate Credit is Recovering… Corporate Loans (annual % change) Corporate Loans by sector (annual % change, Apr.19) Corporate Loans (net flows € bn) Manufacturing, Mining & Quarrying 18.8 Electricity, Gas & Water Supply Accommodation & Food Service Activities (Tourism) 51.5 Storage & Transportation other than shipping Professional, scientific, technical, administrative & support activities Source: Bank of Greece, Piraeus Bank 8 | GREEK ECONOMY & OUTLOOK
02 2.8 REAL ESTATE ENVIRONMENT …as well as Real Estate Valuations Residential Real Estate Prices (annual % change) Non Residential Prices (annual % change) Real Estate FDI in Greece (€ mn) €392 mn 6.4% 500.0 4.0% 400.0 300.0 200.0 100.0 0.0 -100.0 Q1/07 Q4/07 Q3/08 Q2/09 Q1/10 Q4/10 Q3/11 Q2/12 Q1/13 Q4/13 Q3/14 Q2/15 Q1/16 Q4/16 Q3/17 Q2/18 Q1/19 Source: Bank of Greece, Piraeus Bank 9 | GREEK ECONOMY & OUTLOOK
02 2.9 TRENDS & OPPORTUNITIES With Plenty of Entry Points for New Capital Greece has a number of competitive Greece needs to reorient itself from a In several sectors and for a variety of advantages but needs to move up consumption-based to an export-based reasons, a massive consolidation process economy the Value Added Chain has started In sectors with less stellar prospects such Even in sectors with a competitive Emphasis on export-oriented sectors: as retail and wholesale trade, fish- advantage Greece needs infrastructure Tourism, farming, food processing, oil farming, passenger shipping, telecoms, upgrades , ie 5-star resorts, yachting, refining, basic metals & minerals, consolidation will create sectoral convention centers, marketing & chemicals, pharmaceuticals champions with improved margins branding Greece is facing regulatory pressures to Greek banks have committed to reduce More funding , either in the form of equity liberalize and privatize a number of sectors NPLs and restructure their balance sheets or loans, will be required Banks commitment to reduce NPLs & Non Clusters can be created around privatized Privatized assets & natural resources Core Assets will create opportunities in assets , ie ship-repair zone, logistics, cargo development will require substantial real estate, insurance and leasing, hotels management, cruise tourism investment (equity or loans) and in over-indebted but viable companies Regulatory pressures to liberalize industries such as electricity, natural gas, waste processing & management, renewable energy Source: Piraeus Bank Research 10 | GREEK ECONOMY & OUTLOOK
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