Our comprehensive assessment of Greece's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Greece, as well as the latest industry developments that could impact Greece's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Greece before your competitors.
Greece Country Risk
We expect a return to positive economic growth in 2014 following six years of depression. Thereafter we expect growth to remain well below the pre-crisis range.
Underpinning positive economic growth will be a stabilisation in domestic demand as well as a positive contribution from the current account.
The prospect of further spending cuts and tax hikes will ensure that demonstrations and national strikes remain a key feature of the political landscape over the medium term.
Major Forecast Changes
There are no major forecast changes this quarter.
Key Risks To Outlook
Upside Risks To Deficit Forecasts: The severity of the...
Greece Industry Coverage (16)
BMI View: Winter crops enjoyed favourable weather conditions leading up to the harvest , and wheat output should see a modest increase for 2014/15. Plentiful supplies of feed grains should be available for livestock producers, but low demand will constrain output for beef and pork. Poultry supply and demand, meanwhile, are both seen increasing over the forecast period as we expect domestic consumers to favour more affordable meat products. Concerns remain over the long-term viability of the sugar industry in Greece, highlighted by the insufficiency of available sugar beet for the troubled processing monopoly.
Poultry consumption to 2018: up 16.4 % to 195,000 tonnes...
In 2014, BMI forecasts an 8.7% increase in vehicle sales on the back of an expected 15% uptick in the passenger car segment and 19.9% jump in commercial vehicle (CV) sales.
Passenger car sales in Greece increased 22.5% year-on-year in the first seven months of 2014, to 45.101 units. BMI attributes this growth over the year-to-date to low base effects and pent-up demand in the market following years of sustained declines. We believe that slightly higher base effects in H213 and the persistent weakness in the Greek consumer story will serve to temper the growth rate somewhat over the full year. Accordingly, we maintain our existing forecast of 15% growth.
Unemployment remains high, consumer sentiment is weak, and retail sales continue to fall. We expect these dynamics to continue over the year as the economic malaise, combined with austerity measures and political...
Defence & Security
Greece Defence & Security
BMI expects Greece to spend up to USD6.2bn on defence in 2014. On average, Greece has spent USD6.6bn on defence between 2010 and 2013. Generally, we have observed a downward trend as far as Greek defence spending is concerned during this period. This is not altogether surprising as the country has been in the grip of a severe financial crisis which has prompted widespread and dramatic cuts on public spending. For the remainder of the forecast period, we expect Greece to spend an average of USD5.7bn on defence between 2015 and 2018.
Greece is one of a handful of NATO nations which frequently spends in excess of two percent of its GDP on defence. Greece has succeeded in maintaining defence spending at above two percent of its GDP between 2010 and 2013. We expect this trend to continue for the remainder of the forecast period.
We have given Greece an overall security risk rating of 70 for Q414. On average, the country has...
Food & Drink
Greece Food & Drink
BMI View: Â We believe that deflation has further to run in Greece and now expect a return to positive inflation to occur in 2016, from 2015 previously. This will be underpinned by weak domestic demand, a fractured credit transmission channel, relatively restrictive monetary policy (despite recent efforts by the European Central Bank to provide monetary stimulus) and the lingering strength of the euro. Moreover, we warn that prolonged deflation poses a risk to economic growth and debt sustainability.
Headline Industry Data (local currency)
2014 per capita food consumption = -0.1%; forecast compound annual growth rate (CAGR)Â 2013-2018 = +1%.
2014Â alcoholic drink value sales = -1.6%; forecast CAGRÂ 2013-2018 = +0.1%.
2014Â soft drink value sales = -0.2%; forecast CAGR...
Greece Freight Transport
GDP To Grow For The First Time In Six Years
At long last, after six years of recession, there are some positive signs in the Greek economy. They have to be put into context, however. In 2013 economic activity levels continued to shrink, but the good news was that they did so at a slower rate than in previous years. And in the second half of 2013 there were signs of improving sentiment. The European Commission (EC)'s economic sentiment indicator, which remained at record lows in 2012, began what looked like a sustained process of improvement in 2013. BMI believes this has been an early portent of a change in the real economy in 2014, which will be helped by improving eurozone demand. We forecast a return to GDP growth in 2014, with a modest +1.1% expansion rate. We believe GDP will accelerate to 1.8% in 2015. The most important feature of our forecast is the simple fact that the economy will...
BMI View: Â We have revised up our forecasts for 2015 onwards as we factor in major projects going into construction. The b oost from the co nstruction of TAP pipeline and large scale privatisations of transport assets, on the cusp of materialising after years of delays, will provide further upside to our transport forecasts.
Key Areas Offering Growth Potential
Kasteli Airport PPP tender;
Elliniko EUR7bnÂ mixed used development;
TAP gas pipeline to enter construction in 2015;Â
European projects of common interest (PCI) in energy;
Ports privatisations - Thessaloniki and Piraeus;
We have factored in our forecasts the...
BMI View: A few companies have been successful in introducing new products or initiatives in distribution (particularly bancassurance and direct sales). Despite this, with the Greek economy still experiencing a prolonged contraction and a weaker than expected recovery in the Eurozone in 2014 we do not forecast consistent growth in premiums in either segment until 2016 at the earliest.Â
As of late-2014, the outlook for the struggling Greek insurance sector remains bleak. Pressure on household incomes as well as the still poor macroeconomic environment is why most non-life sub-sectors are contracting. In the life sector it is possible that premiums may have found a floor, with some growth being recorded in the first three months of 2014 after a sharp slump in 2013.Â
Â In 2012 a new wildcard emerged that remains relevant as of late-2014. This was the move by Greece's embattled banking sector...
Greece Medical Devices
Espicom Industry View: Â Greece has the fif th larg est medical device market in Central and Eas tern Europe (CEE) but growth has been constrained by the economic crisis. The market is heavily reliant on imports which experienced a strong decline between 2009 and 2012 . It is expected that the government's plans to curb expenditure will continue to affect import growth over the forecast period. Domestic manufacturers are mainly small scale operations focusing on low value, high volume disposables....
Oil & Gas
Greece Oil & Gas
BMI View: Greek hydrocarbons production is forecast to decline by 0.6% in 2015 while consumption will go up by 1.3% , leaving a net shortfall of 356,000boe/d that needs to be imported.
Pharmaceuticals & Healthcare
Greece Pharmaceuticals & Healthcare
BMI View: Â The pharmaceutical and healthcare industry in Greece will continue to contract over the remainder of 2014. The government will seek to reduce public spending on healthcare , despite both the political and economic situation hav ing stabilised. T he generic drug sector and private healthcare industry may present some growth opportunities in the country.
Headline Expenditure Projections
Pharmaceuticals: EUR5.64bn (USD7.45bn) in 2013 to EUR5.28bn (USD7.07bn) in 2014; -6.5% in local currency terms and -5.1% in US dollar terms...
Greece Real Estate
BMI View: The slow recovery of the Greek economy has brought some stability to the commercial real estate market . We foresee this trend to continue also in 2015 as the economy gains a foothold, with transactional activities and investments in the sector further improving. Prices and rental rates are expected to remain stably below their pre-downturn levels as supply continues to outbalance demand.
With the commercial real estate sector closely mirroring the general economic trends of Greece, following years of contraction H114 has seen signs of stabilisation and return to growth. With the Greek economy expected to continue its current path to growth, we expect the stabilising trends in all sub-sectors of the commercial real estate market to continue into 2015. The first half of 2014 has so far seen positive indicators with...
BMI View: After a surge in wind capacity installation rates during 2013 we expect to see a slowdown in the Greek wind marke t and wider non-hydro renewables industry. Recent project announcements highlight that the wind sector will continue to expand in future , but at a slower rate - in line with the changes made to the Greece renewables policy, under the 'New Deal' earlier in 2014.Â
As part of the EU, Greece has committed to the European Commission's 20-20-20 Energy and Climate package. This sets an individual goal for Greece for 18% of energy for final consumption from renewable sources by 2020. However, the country has committed to reaching 20% of energy from renewable sources by 2020, under the Implemented Directive 2009/28/EC (EEL, 140/2009). Greece has certainly made progress on this target...
Slight Recovery On The Cards In 2014
In our view the Greek economy is slowly getting better, though it remains deeply scarred after six years of recession. We still believe 2014 will see the first year of positive growth since the crisis began. But we have scaled down our forecast to 0.2% GDP growth (down from +0.5% in our last quarterly shipping report). The driving factors behind this year's growth are the stabilisation of consumer spending, recovering confidence levels, and a little bit of lift from net exports. Everything else in the Greek economy remains pretty bad. Investment is very weak, government spending is tightly controlled, the banks are still too shaky to boost credit, and unemployment remains on a long-term high. So in our view the recovery, while important, will be a pretty limited affair. We are predicting GDP growth of 1.2% in 2016, but we still don't see the pace picking up...
BMI View : The Greek telecommunications sector appears poised for a significant overhaul as Vodafone sees an opportunity to intensify its competitive assault on the dominant provider, OTE . OTE has taken steps to fend off the rising competition, making an acquisition bid for wireline operator Forthnet 's pay-TV business in July 2014, only to see tradi tional rivals WIND and Vodafone pool their minority shares, together adding up to nearly 40%, in order to thwart OTE's plans. In the meantime, Vodafone is also said to be preparing to buy out its partners in another wireline operator,...
As Greece's economy finally shows signs of growth and begins the long road to recovery, the outlook for the tourism industry is good. Indeed, tourists are expected to begin to return to this traditionally popular Mediterranean destination. BMI predicts healthy growth in arrivals, which is likely to more than make up for the subdued progress of outbound travel from Greece, which will continue to be held back by domestic conditions. Overall tourism-related expenditure and industry value are also set to grow between 2014 and 2018.
Greece's wealth of natural, archaeological and cultural attractions have made it one of Europe's most popular destinations for decades. The flow of tourists was reduced abruptly as a result of the political unrest relating to two consecutive EU bailouts and austerity programmes as recently as 2012. However, with political and economy stability in Greece looking more and more likely over the...