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

Page 2

Corrected Fiscal Imbalances

Page 3

• 18
• 12
• 6

6

• 18
• 12
• 6

6 2007 2008 2009 2010 2011 2012 2013 2014f

General Government Fiscal Balance

Primary balance

• Cycl. adjusted primary balance

Total G. Government balance

% GDP

Source: IMF, MinFin

Primary surplus 2013: 0.8% GDP and an over performance of 0.5% of GDP at a State Budget level in 8M:2014

Page 4

• 17
• 15
• 13
• 11
• 9
• 7
• 5
• 3
• 1

Greece Ireland UK Spain Portugal Cyprus

Improvement in total fiscal Government balance

• Gov. balance

(2009) Gov.balance (2013)

% GDP

Page 5

Corrected External Imbalances

• 16
• 14
• 12
• 10
• 8
• 6
• 4
• 2

2 4 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014:H1

Current account balance

Euro area Greece

% GDP

Page 6

10 15 20 25 30 35 40 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014:H1

Nominal exports & imports of goods and services

Exports nominal (% GDP) Imports nominal (% GDP) % GDP

Page 7

80 90 100 110 120 130 140 150 80 90 100 110 120 130 140 150 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Real effective exchange rate (based on unit labour costs)

Ireland Spain Portugal Germany Greece

Source: European Commission

Index 2001=100

Page 8

2009-2013 :

• 21%

Page 9

Return to Growth

• 15
• 10
• 5

5 10

• 12
• 7
• 2

3 8

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 growth - y-o-y and s.a. q-o-q

GDP (q-o-q, right axis) GDP growth (left axis)

%

Page 10

GDP Q2.2014:

• 0.3% yoy

+0.5% qoq, s.a.

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

Page 12

Significant Growth Potential

…. Significant growth potential

Page 13

• 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

Reforming for growth…

• “Adjustment Progress indicator” (Berenberg & Lisbon

Council)

• Greece ranks 1st 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

Page 16

Page 17

Banks Restored Strength

• 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

Restored strength through:

• 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

Well equipped to address remaining challenges:

Page 20

Key Risk Factors Contained

• 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

Source: Greek PDMA, IMF

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

The unique characteristics of the Greek debt

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1 2 3 4 5 6 7 8 9 2 4 6 8 10 12 14 16 2007 2009 2011 2013 2015f 2017f 2019f

Public Debt: Interest payments and redemptions

Redemptions (left axis) Interest payments (right axis)

% GDP

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

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Thank you

for your attention