1 Economic Analysis and Research Department Bank of Greece Recent Economic Developments On 9 January, the ELA ceiling for Greek banks declined by €2.8 bn to €22.0 bn, reflecting an improvement in the liquidity situation of Greek banks. The ceiling has fallen by €68.0 bn from its peak of €90 bn in July 2015. The Economic Sentiment Indicator increased to 101.0 in December (from 98.4 in November), registering the highest value since November 2014, on the back of further improvement in consumer confidence and higher business expectations in manufacturing. Business expectations receded in retail trade and to a lesser extent in the services sector (where, in any case, confidence is at euro area levels). Industrial production increased slightly in November (0.8% y-o-y), with manufacturing production registering a marginal rise (0.2% y-o-y). Industrial production increased by 4.4% y-o-y in the period January-November 2017 mainly due to the performance of electricity production (10.3% y-o-y) and manufacturing (2.9% y-o-y). HICP headline and underlining inflation measures converged. The slight decline in headline inflation to 1.0% (from 1.1%) was due to lower energy, food items and non-energy industrial goods inflation, while the marginal upward movement of core inflation (0.9%, from 0.8%) was buoyed by the acceleration of services inflation. Employment grew by 3.3% y-o-y in October and the unemployment rate (sa) declined to 20.7%. Net flows of dependent employment in the private sector increased by 15,315 in December 2017 compared to 11,132 in December 2016. Greek Government Bond yields continued to fall, with medium-term yields falling by more and liquidity risk premia across the entire spectrum being suppressed; Greek corporate bond yields fell somewhat, while share prices on the Athens Exchange recorded strong gains, with share prices of industrial companies overperforming. In January-November 2017, the general government cash primary surplus improved, reaching 4.0% of GDP, compared to 3.7% of GDP in the same period last year, mainly due to increased revenue from social security contributions and privatisations as well as decreased primary expenditure. In November 2017 the stock of general government arrears decreased by approximately €0.4 bn against October 2017 and reached €3.9 bn compared to €4.9 bn in December 2016. In 2017, the state budget recorded a deficit of 2.4% of GDP (preliminary data), compared to a deficit of 1.6% of GDP in 2016. The primary balance was €1.1 bn above the revised period target due to containment of ordinary primary expenditure (by €1.2 bn), public investment expenditure (by €0.8 bn) and tax refunds (by €0.2 bn). Ordinary revenue slightly overperformed (by €0.1 bn) though it was outweighed by a shortfall mainly in public investment revenue (by €1 bn) and secondarily in privatisation revenue. NOTE ON THE GREEK ECONOMY January 19, 2018
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Economic Analysis and Research Department
Bank of Greece
Recent Economic Developments
On 9 January, the ELA ceiling for Greek banks declined by €2.8 bn to €22.0 bn, reflecting an improvement in the liquidity situation of Greek banks. The ceiling has fallen by €68.0 bn from its peak of €90 bn in July 2015.
The Economic Sentiment Indicator increased to 101.0 in December (from 98.4 in November), registering the highest value since November 2014, on the back of further improvement in consumer confidence and higher business expectations in manufacturing. Business expectations receded in retail trade and to a lesser extent in the services sector (where, in any case, confidence is at euro area levels).
Industrial production increased slightly in November (0.8% y-o-y), with manufacturing production registering a marginal rise (0.2% y-o-y). Industrial production increased by 4.4% y-o-y in the period January-November 2017 mainly due to the performance of electricity production (10.3% y-o-y) and manufacturing (2.9% y-o-y).
HICP headline and underlining inflation measures converged. The slight decline in headline inflation to 1.0% (from 1.1%) was due to lower energy, food items and non-energy industrial goods inflation, while the marginal upward movement of core inflation (0.9%, from 0.8%) was buoyed by the acceleration of services inflation.
Employment grew by 3.3% y-o-y in October and the unemployment rate (sa) declined to 20.7%.
Net flows of dependent employment in the private sector increased by 15,315 in December 2017 compared to 11,132 in December 2016.
Greek Government Bond yields continued to fall, with medium-term yields falling by more and liquidity risk premia across the entire spectrum being suppressed; Greek corporate bond yields fell somewhat, while share prices on the Athens Exchange recorded strong gains, with share prices of industrial companies overperforming.
In January-November 2017, the general government cash primary surplus improved, reaching 4.0% of GDP, compared to 3.7% of GDP in the same period last year, mainly due to increased revenue from social security contributions and privatisations as well as decreased primary expenditure.
In November 2017 the stock of general government arrears decreased by approximately €0.4 bn against October 2017 and reached €3.9 bn compared to €4.9 bn in December 2016.
In 2017, the state budget recorded a deficit of 2.4% of GDP (preliminary data), compared to a deficit of 1.6% of GDP in 2016. The primary balance was €1.1 bn above the revised period target due to containment of ordinary primary expenditure (by €1.2 bn), public investment expenditure (by €0.8 bn) and tax refunds (by €0.2 bn). Ordinary revenue slightly overperformed (by €0.1 bn) though it was outweighed by a shortfall mainly in public investment revenue (by €1 bn) and secondarily in privatisation revenue.
NOTE ON THE GREEK ECONOMY January 19, 2018
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SUMMARY OF ECONOMIC DEVELOPMENTS AND OUTLOOK
Following stagnation in 2015-2016, GDP growth turned positive in the first nine months of 2017, shaping a positive outlook for the year as a whole.
Soft data indicate a rebound in confidence in 2017 related to progress in the implementation of the economic adjustment programme and the return of Greece to international capital markets: The Manufacturing PMI has been in expansionary territory for the last seven months, by far the
longest period since 2008, reaching a 9.5 year high in December. The improvement was supported by a significant rise in output and new orders. The employment sub-index suggests strong employment dynamics in the last eight months.
Economic sentiment has been on an upward trend since mid-2015 and reached a 3-year high in 2017. Consumer confidence has increased strongly since early 2017. Service sector confidence has also increased substantially in the second half of 2017 and now stands on average at euro area levels.
Financial indicators improved in 2017: yields on Greek government and Greek corporate bonds fell, while share prices rose, reflecting a gradual recovery of investor confidence in connection with steady progress in the implementation of the economic adjustment programme. Following the swap of old GGBs for new ones, that was announced in mid-November 2017, GGB yields have fallen substantially (especially on shorter-term notes). Corporate bond yields have also receded to historically low levels, bringing the cost of market financing for large Greek companies to levels comparable to those of their European peers, while share prices of companies listed on the Athens exchange posted strong gains in 2017.
Economic activity moved into expansionary territory in 2017:9M (1.1% y-o-y). The positive drivers of GDP growth were mainly exports of goods and services (2.3 pp contribution), and to a lesser extent private consumption and gross fixed capital formation (0.4 pp and 0.3 pp, respectively). By contrast, government consumption and imports of goods and services had a negative effect on growth (-0.6 pp and -2.7 pp, respectively).
The major strengths of the evolving recovery are improved export dynamics, the exceptional performance of industrial production and the labour market recovery.
During the first ten months of 2017, real exports of goods increased by 3.5% y-o-y. Travel receipts and receipts from shipping rose by 10.6% y-o-y and 18.1% y-o-y, respectively.
Industrial Production has been expanding at healthy rates since mid-2015. The rebound is largely driven by increasing exports, as companies benefit from the decline in wages and improved competitiveness in an environment of buoyant external demand. Industrial production performed exceptionally well in the first eleven months of 2017 (4.4% y-o-y), mainly due to the performance of electricity production (10.3% y-o-y) and manufacturing (2.9% y-o-y).
Employment has been growing at healthy rates since mid-2014 despite the stagnation of economic activity. The rebound is largely driven by higher job-market flexibility due to past structural reforms and, in 2017, improved economic activity.
Over the past three years, the private sector has been creating on average more than 100,000 net new jobs per year. Net employment flows in 2017 were even higher than in 2016, mainly due to stronger growth in the tourist industry and retail trade. Net inflows continue to rely more on flexible forms of employment, which accounted for 54.9% of new hirings.
Flow imbalances have been eliminated: The primary fiscal balance as a percentage of GDP has improved by about 14 pp since the beginning of the sovereign debt crisis. The 2016 primary fiscal outcome (programme definition) recorded a surplus of 3.8% of GDP, outperforming significantly the target of 0.5% of GDP. The improvement reflects strong revenue performance as well as spending containment, partly on the back of temporary factors that are expected to have unwound in 2017. For 2017 it is projected that the primary balance target of 1.75% of GDP will be reached with a significant margin. For 2018 the primary balance target of 3.5% of GDP is considered achievable.
The current account deficit as a percentage of GDP has fallen by 15 pp since the beginning of the crisis with the current account effectively being close to balance over the last few years.
Over recent years, Greece has benefited significantly from improved competitiveness. In part, this development reflects the effect of structural reforms in the labour market, with wage bargaining becoming more flexible. As a result, the cumulative loss in labour cost competitiveness recorded between 2000 and 2009 has been recovered. Improvements in price competitiveness are also evident and faster increases in the prices of tradeables relative to nontradeables provide incentives for producers to move into tradeable sectors.
Openness has improved substantially. Exports of goods and services excluding the shipping sector have increased by 47% in real terms since their trough in 2009, similar to euro area exports. The share of total exports in GDP increased from 19.0% in 2009 to 30.2% in 2016.
Qualitative indices reflecting the business environment suggest that Greece is still ranked relatively low. However, it is the country with some of the largest improvements in recent years. Policy should continue to put further emphasis on improving non-price competitiveness.
In 2017, higher crude oil prices in conjunction with tax hikes in automobile fuel, tobacco, coffee and telecom
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services (January 2017) offset remaining deflationary pressures in non-energy industrial goods and drove HICP inflation into positive territory. Negative base effects are anticipated to weigh significantly on inflation developments in 2018.
Looking forward, we expect GDP to grow by 1.6%, 2.4% and 2.5% in 2017, 2018 and 2019, respectively.
Risks to the projections: Downside risks exist related to the impact of increased taxation on economic activity and reform implementation. Downside risks connected with the international environment include the rise in protectionism worldwide and a possible resurgence of the refugee crisis. Upside risks are related to the potential inclusion of Greek sovereign debt in the ECB’s quantitative easing programme (QE) and potential additional debt relief measures.
Taking a longer-term perspective, rebalancing of the Greek economy is on-going, in spite of its stalling in
the second half of 2014 and into 2015. Implemented and ongoing structural reforms have improved the long-term growth outlook.
Whilst flow imbalances have been eliminated, the reduction of these imbalances has come at a high cost. Real GDP is now about one quarter down on its pre-crisis levels.
Additionally, large stock imbalances still remain. Unemployment, though falling, is high (20.2% in 2017:Q3). The general government debt to GDP ratio has risen substantially – in 2009, it stood at 126.7%; it reached 180.8% of GDP at end-2016. Indebtedness of the private sector has generated significant NPLs which are hampering banks’ ability to support the recovery through the granting of new credit. Finally, a rebalancing between private consumption (which stands at 70% of GDP) and investment (11% of GDP) is required if future growth is to prove more sustainable.
Domestic saving is insufficient to meet the investment needs of the Greek economy which, after a long period of very low investment rates, are significant. Thus, the restoration of normal bank credit conditions with the resolution of NPLs along with renewed access of companies to capital markets is necessary. Additionally, full use should be made of both EU Structural Funds and financial resources provided by the EIB, EIF and the Hellenic Fund for Enterprise and Development. Finally, conditions should be encouraged that will attract foreign capital, notably in the form of FDI.
The MoU, signed between the EC and Greece on 19 August 2015, envisages ESM financing of up to €86 bn over 2015-18. The MoU places emphasis on: (i) the restoration of fiscal sustainability; (ii) the safeguarding of financial stability, not least through resolution of NPLs; (iii) the implementation of structural policies to enhance competitiveness and growth; and (iv) the modernisation of the state and public administration.
In line with these pillars, most structural and fiscal reforms agreed have been legislated and include inter alia: pension and income tax reform, indirect taxation, the NPL strategy, privatisations and an automatic contingent fiscal correction mechanism, the enhancement of electronic payments as well as the release of the MTFS 2018-2021.
Programme reviews: Following the positive assessments of the programme implementation, the first review was finally completed in October 2016 and the second in June 2017. Following a Staff Level Agreement reached on 2 December 2017 between the Greek authorities and the European Institutions, efforts to close the third review by the next Eurogroup on 22 January 2018 are underway and, to this end, an omnibus bill was passed on 15 January 2018 containing all required prior actions.
Priorities for the fourth review relate to certain key privatisations (including Hellinikon, gas distribution and the Salonika port), progress with implementing structural reforms (including the electricity market liberalization, land use reform, outstanding Toolkit recommendations), as well as the new mobility and evaluation scheme for public sector workers and the selection of top managers.
Financing: Finance is being disbursed in tranches and has included funds for bank recapitalization and arrears clearance. Additionally, in July Greece returned to global capital markets after three years, raising €3 bn (yield: 4.625%; annual coupon rate: 4.375%).
Debt relief measures: the Eurogroup on 24 May 2016 agreed to a package of short-term debt relief measures to be phased in progressively and subject to the ESM programme conditionality. Subsequently, on 23 January 2017, the ESM adopted a set of short-term debt relief measures to reduce interest rate risk and ease the repayment profile. The Eurogroup of 15 June 2017 reconfirmed the commitments and principles contained in the May 2016 statement, mentioning a possible deferral of EFSF interest and amortization by up to 15 years in the context of the medium-term measures. Additionally, a growth-adjustment mechanism is envisaged to correct for differences between assumed and actual growth rates after 2018. The primary surplus target of 3.5% of GDP for the years 2019-2022 will be reduced to above but close to 2% of GDP during 2023-2060.
The BoG published a proposal for debt relief in its monetary policy report in June 2016 and June 2017, which is based on a combination of extensions of maturities, smoothing of interest payments over time (which increase substantially after 2021 due to deferred interest payments on EFSF loans) and lowering the primary surplus target to 2% of GDP (from 3.5%) after 2020. The proposal shows that even mild debt relief measures could render debt sustainable.
On 25 September 2017 the General Affairs Council decided to close the Excessive Deficit Procedure (EDP) for Greece on account of the significant progress made in returning to a path of fiscal sustainability.
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LAST TWO WEEKS’ NEWS AND DATA RELEASES (08 - 19 January 2018)
Real Economy
08/01/2018: European Commission released Economic Sentiment Indicator for December 2017.
09/01/2018: ELSTAT released Industrial Production Index for September 2017.
10/01/2018: ELSTAT released Motor Vehicle Circulation Licences for December 2017.
11/01/2018: ELSTAT released Labour Force Survey results for October 2017.
12/01/2018: ELSTAT released HICP for December 2017.
12/01/2018: ELSTAT released Import Price Index in Industry for November 2017.
15/01/2018: The omnibus bill addressing outstanding prior actions was voted into law by the Parliament as a step towards the conclusion of the third programme review.
15/01/2018: the Ministry of Labor released the ERGANI figures on business-sector employment flows in December 2017.
16/01/2018: ELSTAT released Building Activity for October 2017.
17/01/2018: Parliament voted into law the bill on “Energy Communities”.
19/01/2018: ELSTAT released Turnover Index in Industry for November 2017.
External Sector
08/01/2018: ELSTAT released merchandise trade data for November 2017.
15/01/2018: BoG released data for the Balance of travel services for the January – September 2017 period.
Fiscal
08/01/2018: MoF, general government cash balance for January-November 2017.
15/01/2018: MoF, state budget execution for January-December 2017 (preliminary data).
17/01/2018: BoG, central government net borrowing requirements on a cash basis for January-December 2017.
18/01/2017: MoF, Transfers / Grants-Payments of General Government Arrears Νovember 2017.
NEXT TWO WEEKS’ NEWS AND DATA RELEASES (22 January – 02 February 2018)
Real Economy
24/01/2018: ELSTAT releases Quarterly Non-Financial Accounts of Institutional Sectors.
30/01/2018: ELSTAT releases Producer Price Index in Industry for December 2017.
30/01/2018: European Commission releases Economic Sentiment Indicator for January 2018.
31/01/2018: ELSTAT releases Turnover Index in Retail Trade in November 2017.
01/02/2018: Markit Economics releases PMI for January 2018.
External Sector
20/01/2018: BoG releases BOP data for November 2017.
Monetary & Financial
23/01/2018: ECB releases the results of the euro area Bank Lending Survey (BLS) for 2017:Q4.
26/01/2018: ECB releases data on monetary developments in the euro area (incl.Greece) for December 2017.
01/02/2018: ECB releases data on MFI interest rate statistics in the euro area (incl.Greece) for December 2017.
Fiscal
22/01/2018: ELSTAT, quarterly non financial accounts of general government for 2017:Q3.
24/01/2018: MoF, state budget execution for January-December 2017 (final data).
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BACKGROUND INFORMATION
1. OUTPUT, DEMAND AND CONJUNCTURAL INDICATORS
Medium-term trends and outlook
Medium-term trends: Following stagnation in 2015-2016, economic activity moved into positive territory in 2017:9M (1.1% y-o-y), shaping a positive outlook for the year as a whole.
The rebound of economic activity can mainly be attributed to the growth of exports of goods and services, with exports of services making the greatest contribution to growth (1.4 pp) as a result of a significant rise in tourist and shipping receipts. Exports of goods also continued growing at high rates exceeding the growth of external demand due to improved competitiveness.
Over the same period, private consumption increased moderately, mainly supported by labour market dynamics; gross fixed capital formation also had a marginally positive contribution to growth mainly due to its performance in 2017:Q1 and the significant increase in transport equipment and weapons systems, reflecting the purchase of ships (Chart 2).
By contrast, government consumption and imports of goods and services had a negative contribution to growth.
Looking forward, the BoG projects GDP to increase by 1.6%, 2.4% and 2.5% in 2017, 2018 and 2019, respectively (see Table 3).
Over the projection period, private consumption is expected to increase moderately in line with the rise in real disposable income which will be supported mainly by dependent employment income, resulting largely from employment growth.
Gross fixed capital formation is projected to contribute positively to growth, mainly due to the rise in business investment on the back of the gradual recovery in investors’ confidence, liquidity in financial markets and the speeding-up of the implementation of the privatisation programme.
Exports of goods are expected to continue along the upward path witnessed since 2014, exceeding the growth of external demand, while exports of services are estimated to increase in line with estimated global demand for tourist and shipping services. Imports of goods and services are expected to grow in line with domestic demand.
Employment, which has been on an upward trend since mid-2014, is expected to increase over the forecast horizon driven by the rise in economic activity, the low wage bill as well as the institutional framework which now allows for higher labour market flexibility.
HICP inflation is expected to increase, though at more moderate rates compared to 2017, as the last indirect taxation measures drop out and negative base effects are anticipated to weigh on inflation developments.
Short-term developments
ELSTAT’s provisional data (4/12, sa data) pointed to an increase in real GDP in 2017:Q3 (1.3% y-o-y, 0.3% q-o-q). The positive driver of GDP growth in 2017:Q3 was exports of goods and services (7.8% y-o-y), with exports of services rising (12.6% y-o-y) and exports of goods growth (2.8% y-o-y) exceeding external demand. Government consumption receded (-2.2% y-o-y) and private consumption stabilised, while gross fixed capital formation declined (-8.5% y-o-y), partly reflecting a shortfall in disbursements from the Public Investment Programme. Imports of goods and services increased (9.3% y-o-y), contributing negatively to GDP growth.
Nominal disposable income of households and non-profit institutions serving households (Chart 5) increased by 0.2% y-o-y in 2017:Q2. Nominal income before taxes and social contributions increased (1.4% y-o-y) mainly due to a rise in dependent employment and self-employed income, thus contributing positively to disposable income (1.3 and 0.4 pp, respectively). Property income and other transfers also had a positive contribution to disposable income (0.5 pp). By contrast, net social transfers had a negative contribution (-2.5 pp), due to an increase in social contributions (7.2% y-o-y) and a decline in social benefits (-3.1% y-o-y). Taxes on income and wealth declined (-4.5% y-o-y); as a result, total taxes had a positive contribution to disposable income (+0.4 pp). Real disposable income of households and NPISH declined by 1.2% y-o-y in 2017:Q2, while private consumption increased (0.4% y-o-y, nsa data), implying further dissaving (-9.9%).
Economic sentiment (ESI) increased sharply to 101.0 in December (from 98.4 in November – Chart 8) registering its highest value since November 2014. Business expectations significantly improved in manufacturing, and to a lesser extent in construction, while business expectations receded in retail trade and marginally in the services sector (where, in any case, confidence increased markedly in the second half of 2017 reaching on average euro area levels); consumer confidence has been increasing since the start of 2017.
Employment plans in December improved in manufacturing, in services and construction, but stabilised in retail trade. Consumers have expected a decline in unemployment over the last eight
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months; December projection pointed to the lowest level of unemployment since April 2015 (36.1, from 41.3 in November).
Retail sales volume declined in October by 1.1% y-o-y (from -0.8% y-o-y in September), while seasonally adjusted data pointed to a marginal increase of 0.1% m-o-m. Retail sales volume excluding automotive fuel also posted a decline of 1.5% y-o-y. The sub-categories of the index “food, beverages & tobacco” and “clothing & footwear” declined (-4.7% y-o-y and -0.6% y-o-y, respectively), while “furniture - electrical and household equipment” and “books, stationery & other goods” increased (4.8% y-o-y and 7.3% y-o-y, respectively). Retail sales volume increased in the January-October 2017 period by 1.6% y-o-y.
New passenger car registrations increased in December for the seventh consecutive month by 16.3% y-o-y and by 22.2% y-o-y for 2017 as a whole.
On the supply side, manufacturing PMI further increased in December to a 9.5 year high (53.1, from 52.2 in November). It has been in expansionary territory for seven consecutive months, by far the longest period since 2008. Marked rises in new orders, in both domestic (55.0, from 53.6 in November) and foreign markets (54.6, from 51.9 in November) contributed to the sharpest rise in output since August 2008 (54.3, from 51.7 in November). The employment sub-index suggested marked job creation in the manufacturing sector for the eighth consecutive month (52.4, from 53.6 in November).
Manufacturing production increased marginally in November by 0.2% y-o-y; overall it registered an increase of 2.9% y-o-y in the January-November 2017 period, mainly driven by the rise in coke and refined petroleum products (4.1% y-o-y), food products (1.6% y-o-y), basic metals (21.1% y-o-y) and basic pharmaceutical products (13.5% y-o-y).
Industrial production increased in November (0.8% y-o-y, from 0.7% in October) mainly due to the performance of electricity production (6.5% y-o-y). In the January-October 2017 period, industrial production increased by 4.4% y-o-y.
The volume of building permits issued increased significantly in October (96.7% y-o-y) and by 23.5% y-o-y in the January-October 2017 period mostly related to construction activity in the tourist sector.
The share of services in total gross value added rose to 80.9% in 2016, higher than the 2001-2008 average (76.6%). A trend visible since 2012 is the increase in the share of tradable services related to tourism. Sectors related to tourism are estimated to have increased their share in gross value added from 10.5% in 2012 to 11.5% in 2016.
Output in the service sector (as measured by gross value added) increased by 0.3% y-o-y in 2017:9M. Notably, over the same period, turnover indices increased y-o-y in motor trade (4%), accommodation & food service activities (10%), wholesale trade (4%) and travel agencies (9%). In the transport sector, turnover indices increased in land and air transport (8.7% and 9.2% y-o-y, respectively), but declined in water transport (11% y-o-y).
Tourist arrivals in October, based on the BoG's Frontier Travel Survey, increased by 8.4% y-o-y, due to an increase in arrivals from EU-28 and non-EU countries by 10.3% and 3.1% y-o-y, respectively. Tourist arrivals rose by 10.1% y-o-y in the period January-October 2017, reaching 25.9 mn travellers y-t-d. In December 2017, international arrivals at Greek airports increased by 9.5% y-o-y (11.1% y-o-y in 2017 as a whole), while international arrivals at Athens International Airport increased by 13.0% y-o-y in December (12.0% y-o-y in 2017 as a whole).
Travel receipts (at constant prices, excluding revenue from cruises) increased by 14% y-o-y in October 2017. In the period January-October 2017, travel receipts (at constant prices) increased by 10% y-o-y, while the average expenditure per journey marginally declined by 0.1% y-o-y.
2. PRIVATISATIONS AND STRUCTURAL REFORMS
Medium-term trends and outlook
Given the poor results achieved in the privatisation programme, the Greek government agreed to take all actions pending in the field of privatisations. The Privatization and Investment Fund, officially called the Hellenic Corporation of Assets and Participations, was established in 2016 to manage valuable Greek assets and state assets in several public corporations and maximize their value through privatisations and other means. The implementation of the revised Asset Development Plan of the HRADF (as approved by the Government Council of Economic Policy in January 2018) is a key priority of the Support Programme. It includes 19 privatisation projects: four are finalised (14 regional airports, Piraeus Port Authority, TRAINOSE, Thessaloniki Port Authority), some are at an advanced stage (Hellenic Gas Transmission System Operator, Afantou Rhodes, Hellinikon), while the HRADF has initiated the process for the remaining projects, most of which are expected to be completed in 2018 according to the provisions of the State Budget.
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According to the State Budget 2018, public revenues from privatisations amounted to €499.8 mn in 2016 and are expected to reach €1,656.7 mn in 2017 mainly due to the sale of the 14 regional airports (€1,234 mn). In addition, some public organisations sold their participation in subsidiaries to foreign investors (e.g. National Bank of Greece sold 67% of shares of Astir Palace Vouliagmeni in 2016, PPC sold 24% of shares of ADMIE in June 2017, National Bank of Greece will finalise the sale of 75% of shares of Ethniki Insurance) for a total amount of €1,337 mn. Thus, aggregate privatisation revenues (public and private) amounted to €798.8 mn in 2016 and are expected to reach €2,694.7 mn in 2017. The forecast for 2018 is €2,736.9 mn mainly due to the privatisations of the Public Power Corporation (DEI), Hellenic Petroleum (ELPE), Athens International Airport (DAA), Hellenic Gas Transmission System Operator (DESFA), Hellenic Telecommunication Organisation (OTE), Salonica Port Authority (OLTH), Public Gas Corporation (DEPA), Athens Water Supply and Sewerage Company (EYDAP) and Salonica Water Supply and Sewerage Company (EYDATH).
During 2011-2014 a number of structural reforms were legally enacted and implemented in a wide range of markets and institutions. Implementation was strong during 2011-2012, but slowed thereafter. Reforms in the labour market have brought employment protection legislation in line with average EU practices and created the framework for a decentralized wage setting system. Progress in lifting regulatory restrictions for businesses and in improving the business environment has overall been slower.
Reforms legally enacted or progressed during 2015-2017 included interventions spanning across a wide set of areas: social security and pension system (incl. a unified social security system), product markets (incl. progress with energy markets, OECD Toolkits implementation), labour markets (collective dismissals framework; action plan against undeclared and under-declared work), public sector efficiency (new centralized procurement scheme) and transparency (funding of political parties). Initiatives improving the business environment notably included:
The new investment incentives framework law ("Development Law"; L. 4399/2016) that inter alia provides for fast track procedures and a stable tax regime for large investment projects, and specifies a minimum investment budget requirement for SME subsidies, new categories of subsidized expenses and new financing instruments.
Streamlining of investment licensing procedures by substituting ex ante licensing with ex post monitoring for selected sectors: food and beverage manufacturing, tourist and entertainment related activities.
New Code of Civil Procedures and the establishment of a system for electronic auctions; revised corporate bankruptcy code (incl. “first start” provisions).
Introduction of an NPL management framework; opening the market for selling loans. A framework promoting electronic transactions to tackle tax evasion and corruption.
Short-term developments
On 15 January, the Government Council of Economic Policy (KYSOIP) approved the revised Asset Development Plan of the HRADF.
Meeting outstanding requirements towards the conclusion of the economic adjustment programme involves both new reform initiatives and marking progress on the implementation of reforms already enacted. Specifically, the following structural measures were legislated in the context of the third review (January 2018): Labour markets: the quorum for primary level unions to vote on a strike was increased to 50
percent.
Product markets: (i) pending OECD Toolkit recommendations (e-commerce, media, public works, pharmacies opening hours), (ii) establishment of the Hellenic Energy Exchange (target model).
Business environment: (i) investment licensing rationalization (mining and quarrying, logistics, installation of manufacturing units), (ii) establishment of a monitoring and control framework to support the new licensing system (“ex-ante notification”), (iii) new cadastral agency, (iv) extension of e-auctions coverage, incl. public sector debt claims, (v) enacting the legal framework for compulsory mediation, (vi) amendment of the insolvency framework to provide absolute priority to employees claims (up to a limit), followed by secured creditors claims.
3. LABOUR MARKET AND COSTS
Medium-term trends and outlook
Employment increased by 2.1% y-o-y in the first nine months of 2017, (cf. 2.3% y-o-y in 2016:9M) and the number of unemployed declined by 8.8% (cf. -5.9% y-o-y in 2016:9M). The unemployment rate in the first nine months of 2017 dropped to 21.5% (cf. 23.5% in 2016:9M). The long-term unemployment rate increased to 73.2% (cf. 72.1% in 2016:9M), while the youth unemployment rate (in
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the 20-29 age category) declined to 34.5% in 2017:9M (cf. 38.0% in 2016:9M).
Dependent employment flows in the private sector (Ministry of Labour ERGANI information system) increased significantly in 2017. The net cumulative balance was positive by 143,545 jobs, higher than the corresponding period of 2016 (136,260 jobs). Both hirings and dismissals were higher on an annual basis largely reflecting the seasonality of the tourist sector. The share of part-time and intermittent jobs in 2017 accounted for 54.9% of new hirings, marginally higher than in 2016 (54.7%).
According to national accounts data (ESA 2010), compensation of employees increased by 2.3% y-o-y in 2017:9M. As the number of employees increased by 1.8%, compensation per employee increased by 0.5% y-o-y (-0.5% in 2016:9M).
The ELSTAT Index of Wages for the total economy (excluding agriculture and private households, nsa, non working-day-adjusted) stabilised y-o-y in 2017:9M (cf. 2.1% in 2016:9M).
The distribution of labour earnings in 2017 for those working under private-law contracts (ERGANI annual report) continued to be compressed and to move to the left as 51.37% of the workers earn a gross wage of below €800 per month or are paid for part-time or intermittent employment (compared to 49.9% in 2016, according to revised figures). In particular, 22.6% of workers were paid for part-time or intermittent employment in 2017 (cf. 22.5% in 2016), while 11.0% were in full-time jobs with gross earnings close to the minimum wage (€600 per month or less) and 17.7% earned between €600 and €800 per month (cf. 10.4% and 17.1%, respectively, in 2016).
Labour productivity continued to fall in 2017:9M, continuing the trends of 2015 and 2016. In 2017:9M, labour productivity fell by 0.7% y-o-y (cf. -0.9% in 2016:9M), as total employment increased by 1.8%, while activity increased by 1.1% y-o-y in the same period.
Unit Labour Costs (ULC) economy-wide increased by 0.9% y-o-y in 2017:9M (cf. 0.1% in the respective period in 2016, Chart 22).
Firm-level collective agreements have gained pace compared to sectoral/occupational-level agreements, following the change in the institutional framework in late 2011. In the 2012-2014 period, 1,671 such agreements were signed. Thereafter, during 2015-2016, 599 new agreements were signed, the majority of which concerned wage freezes.
Active Labour Market Policies (ALMPs) aimed at jobless households and young individuals rely on EU funds and include: employment subsidies (including entrepreneurship subsidies), programmes supporting work experience and/or training, and employment opportunities in public sector entities. For 2017, new ALMPs aimed to engage some 120,000 unemployed, including also a programme that covered the cost of employers’ social security contributions if they hire self-employed without staff as regular employees. A new programme was initiated in January 2018 aimed at the young self-employed (less than 35 years old) who have never hired employees in the past for hiring unemployed by subsiding 50% of their wage.
Short-term developments
LFS quarterly data show an increase in employment growth by 2.3% y-o-y in 2017:Q3. The unemployment rate declined to 20.2% in 2017:Q3, compared to 22.6% in 2016:Q3, as the number of unemployed decreased by 11.2% y-o-y. Part-time employment declined marginally to 9.4% of aggregate employment compared to 9.7% in 2016:Q3. Dependent employment increased by 2.6% y-o-y as in 2016:Q3, while self-employment increased by 1.7% y-o-y (compared to 1.9% in 2016:Q3). The unemployment rate declined by 2.4 pp for males (16.5% in 2017:Q3 compared to 18.9% in 2016:Q3), and by 2.3 pp for females (24.9% in 2017:Q3 compared to 27.2% in 2016:Q3).
LFS monthly data confirm the positive trend in employment growth. Employment grew by 3.3% y-o-y in October 2017 compared to 1.6% y-o-y in October 2016, resulting in a decline in the number of unemployed by 8.6% y-o-y. The (sa) unemployment rate in October 2017 declined further to 20.7% (compared to 23.3% in October 2016), 2.7 pps lower than in December 2016.
Ministry of Labour (ERGANI) data on dependent employment flows in the private sector for December 2017 show an increase in net flows mainly due to hirings in restaurants and the retail sector. Net flows in December were positive by 15,315 jobs (compared to 11,132 jobs in December 2016). The share of part-time and intermittent jobs amounted to 57.4% of new hirings.
The number of registered unemployed (OAED data) decreased in December 2017 by 3.4% y-o-y, mainly due to a decrease in the number of short-term unemployed by 8.6% y-o-y, while the number of long-term unemployed increased by 1.1% y-o-y. On a monthly basis, the number of those receiving unemployment benefits (22.1% of the registered unemployed) increased by 71,582 individuals.
Compensation of employees increased by 2.2% y-o-y in 2017:Q3 (compared to -1.2% y-o-y in 2016:Q3, according to nsa figures). As the number of employees increased by 2.0% y-o-y (ESA 2010), compensation per employee increased by 0.1% y-o-y (-1.8% in 2016:Q3).
The ELSTAT Index of Wages for the total economy (excluding agriculture and private households, nsa, non working-day-adjusted) fell by 1.3% y-o-y in 2017:Q3 (cf. +1.3% y-o-y in 2016:Q3).
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According to Ministry of Finance cash figures (5 January 2018), outlays for the remuneration of employees (incl. social security contributions) in the general government rose by 3.3% y-o-y in the January-November 2017 period. Outlays for central government pensions are no longer a part of the ordinary budget, but are paid by EFKA (the unified social security fund); therefore, they should no longer be considered as part of compensation of employees in general government.
According to information available in ERGANI, 251 new firm-level agreements were signed in January-December 2017 (covering 87,220 employees), most of which refer to no wage changes or wage decreases.
4. PRICES
Medium-term trends and outlook
HICP inflation came in at 1.1% in 2017 (as against 0.0% in 2016), largely as a consequence of the various increases in indirect taxation and higher crude oil prices.
The GDP deflator increased by 0.6% y-o-y in 2019:9M reflecting an increase in profit margins.
Looking forward, as the last indirect taxation measures drop out, negative base effects are anticipated to weigh on inflation developments and keep HICP inflation at lower levels compared to 2017.
Real estate market prices continued to decline in 2017, although at a more moderate pace. Residential property prices are estimated to have declined by 1.2% on average in 2017:9M (Chart 26). Nominal prime office prices are estimated to have declined by 0.7% on average in 2017:H1, while nominal prime retail prices increased by 0.5% compared with 2016:H2. In 2017:H1 nominal office rents increased marginally by 0.1% compared with 2016:H2, while nominal retail rents recorded a decrease of 1.5% (Charts 27 and 28). The continuing decline in prices in most sectors reflects weak demand, the large stock of secondary and lower-class properties and banks’ reluctance to provide new loans. Nevertheless, the trend towards stabilisation in various sectors of the real estate market, that emerged during 2016, persisted throughout 2017.
Short-term developments
HICP headline inflation came in at 1.0% y-o-y in December 2017 from 1.1% y-o-y in November. This outcome was due to all HICP components with the exception of services.
Core inflation (HICP excluding energy and unprocessed food) increased to 0.9% y-o-y in December 2017 from 0.8% y-o-y in November, an outcome that can be attributed to services inflation (1.1% from 0.6%).
Industrial producer prices (PPI) inflation accelerated to 4.4% y-o-y in November 2017 from 2.6% y-o-y in October. This development is entirely due to the energy component (9.9% from 5.1%). In the non-domestic market the annual rate of change of prices also accelerated to 9.0% y-o-y in November from 5.2% y-o-y in October.
Imports price inflation (based on the Import Price Index in Industry) accelerated to 5.8% y-o-y in November 2017 from 3.9% y-o-y in October. [Note: The Import Price Index measures price changes in items imported by the industrial sector, including capital and investment goods used in the production process as well as final consumer goods].
Real estate market: Based on BoG residential property data, nominal apartment prices are estimated to have declined on average by 0.6% y-o-y in 2017:Q3 (provisional data). Investment in construction for residential property (at constant prices) still remains at very low levels at 0.6% of GDP (2017:Q3).
5. EXTERNAL BALANCES, COMPETITIVENESS
Medium-term trends and outlook
The continued improvements in the current account in the last few years continued in 2017, with the services surplus rising, reflecting increasing net receipts from travel, transport and other services, that compensate for the higher balance of goods deficit (the latter mainly driven by a rise in the negative oil bill). The primary and secondary income accounts have also contributed positively.
Between December 2009 and the end of the period January-September 2017, Greek exports of goods increased by 45.3% in real terms (EA 44.4%, Chart 31), while receipts from services increased by only 3.3%, mainly due to weakness in the shipping sector. Excluding shipping, receipts from services showed an increase of 36.2% in real terms. Overall, Greek exports of goods and services, excluding shipping, increased by 47.1% in real terms (EA 47%, Chart 30). Over the same period, total imports of goods and services declined by 18% in real terms (EA 36%), 34% since their historical peak in 2008.
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Looking forward, the international environment is more supportive of Greek exports of goods and services, as a result of the broad-based recovery in global economic activity and world trade. A pick-up in domestic activity, though, will have a positive effect on imports as well. Developments seem to be favourable for the tourist sector with revenues above 2015 levels, as well as shipping, though revenues brought to Greece are still below levels seen before the imposition of capital controls. Overall, the current account balance is expected to be almost balanced in 2017.
EU funds: Receipts from structural funds have been declining over the last few years. In both 2016 and 2017, they shrank to €2.0 bn and €1.3 bn, respectively (compared to €3.0 bn in 2015 and €3.9 bn in 2014). This trend is largely due to the waning impulse from the absorption of remaining funds from ESPA 2007-2013 and a shortage of new and mature investment projects. So far, Greece has absorbed only a quarter of the “new ESPA” funds, although it is not atypical to see a strong acceleration in absorption towards the end of the programming period, namely the next two years. Receipts for farmers’ subsidies also declined slightly to €2.1 bn in 2017 from €2.6 bn in 2016.
FDI inflows in 2017 continued the upward trend developed in 2016. In January-October 2017, the total inflow reached €3.1 bn, of which 41% reflected intercompany loans whilst 30% was new equity and 12.2% mergers and acquisitions. Similar to 2016, FDI inflows are mainly directed to services sectors (transportation and financial intermediation) and originate particularly from the UK, Germany and the Netherlands.
Migration: According to the European Commission’s latest report (December 2017), total disbursements of migration-related funds to Greece (authorities and international organisations/agencies operating in Greece) have reached €405 mn from an allocated total of €946 mn. This includes long-term funding and emergency assistance. In addition, €401 mn have been contracted to date under the EU’s Emergency Support Instrument for humanitarian aid, channeled via international organisations.
Labour cost competitiveness, after a deterioration of 1.6% in 2016, is not expected to improve in 2017 either, according to BoG estimates. Nevertheless, ULC based competitiveness has improved significantly from 2009 to 2016 (by 24.1% according to ECB) due to substantial labour market reforms and sizable declines in wage costs. As a result, the cumulative loss in labour cost competitiveness between 2000 and 2009 has been recovered. Price competitiveness is projected by BoG to decline further by 0.4% in 2017 after a deterioration by 0.5% in 2016. HICP based competitiveness has improved by 11.3% cumulatively from 2009 to 2016 according to the ECB.
Non-price or structural competitiveness has retreated over the past two years according to a number of indicators. In particular, according to the latest World Bank Doing Business (Oct. 2017), Greece ranked 67
th among 190 countries, from 61
st in 2016 and 58
th in 2015. According to the latest
World Economic Forum’s Global Competitiveness Report 2017-2018 (Sept. 2017) Greece ranked 87th
among 137 countries, from 86th in 2016 and 81
st in 2015. According to WEF, the most problematic
factors for doing business in Greece are high tax rates followed by bureaucracy, tax regulations and policy instability. Access to financing retreated this year to the 6
th place among reported problematic
factors, from the 4th place in 2016 and the 1
st place in 2015.
Greece had the highest rate of responsiveness to OECD recommendations among OECD countries in 2011-2012 (90.0) and 2013-2014 (70.0). This trend slowed down significantly in 2015-2016 (40.0), among a general slowdown in the pace of reforms in OECD countries which was more pronounced in countries that exhibited the highest levels of reform responsiveness in previous years (OECD, Going for Growth 2013, 2015 & 2017).
Short-term developments
In October 2017, exports and imports, at current prices, increased by 9% and 20%, respectively (3.6% and 15.4% at constant prices). Receipts from travel and transportation - mainly sea - rose by 10.6% and 18.1% respectively.
In the January-October period 2017, the current account recorded a surplus of €712 mn, almost double than that of the same period of 2016.
The €2.1 bn y-o-y widening in the deficit of the balance of goods is primarily the result of an increase in the deficit of the oil balance. The deficit of the non-oil balance of goods also grew, as the €2.1 bn increase in the value of imports more than offset the €1.4 mn rise in the value of exports. Overall, exports of goods grew by 3.5% and imports by 7.9% at constant prices. The sectors with the largest contribution to the exports increase, year to date, besides the fuel sector, were “metals and metallic products’’, “chemicals’’ (including pharmaceuticals), “textiles and apparel’’ and “food and beverages’’. As regards the increase of imports, in the same period, oil and ships imports had the highest contribution.
The €2.1 bn increase in the surplus of the services balance, in the January-October 2017 period, is the result of an improvement in all of its main components and mostly in the travel balance.
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Travel receipts (nominal) increased by 10.6% y-o-y over the same period, as the non-residents’ arrivals increased by 10.1% and expenditure per trip increased marginally (0.9%). The increase in travel receipts is attributed to a 14.1% rise in receipts from the EU28, while receipts from non-EU28 increased by 4.8%.
In the January–October 2017 period, receipts from transportation services increased by 18.1% y-o-y. However, they have not returned to the levels seen before the imposition of capital controls, which, together with the uncertainty over the outcome of the ongoing procedure with the European Commission on the tonnage tax of maritime transport providers, continue to influence the shipping industry and the extent to which it directs business through other countries. Freight rates based on the ClarkSea Index increased by 14.5% y-o-y; dry bulk freight rates increased, whereas tanker freight rates continued to fall, though at a decelerating pace.
In the January–November 2017 period, the primary and secondary income accounts improved y-o-y, but the capital account surplus dropped as general government receipts from the EU were significantly lower.
EU funds: In 2017 as a whole, €2.1 bn were received in farmers’ subsidies and €1.3 bn from structural funds; the inflows were realised largely in January-February, June-July and December.
FDI inflows in October 2017 reached €141mn, almost half of the previous month; no substantial transactions were recorded.
Based on ECB data (HCIs), unit labour cost competitiveness deteriorated by 0.3% q-o-q in 2017:Q2 and price competitiveness retreated by 1.5% q-o-q in 2017:Q3, mainly due to the appreciation of the nominal effective exchange rate (1.9% q-o-q in 2017:Q3).
6. FISCAL DEVELOPMENTS
Medium-term trends and outlook
General government primary outcome – programme definition The general government primary outcome in 2016 stood at 3.8% of GDP, outperforming the programme target for a primary surplus of 0.5% of GDP by a large margin (Chart 39). According to the latest MoU, the new fiscal path foresees primary balance targets of: 1.75% of GDP for 2017 and 3.5% of GDP for 2018 to 2022.
Medium Term Fiscal Strategy (MTFS) 2018-2021: The programme primary surplus target of 3.5% of GDP is projected to be achieved during 2018-2021, with a margin of 0.5% of GDP beyond 2018. The primary balance (programme definition) is projected at 1.9% of GDP in 2017, 3.5% of GDP in 2018 and 4.0% of GDP in 2019-2021, respectively. The projection is underpinned by expenditure reducing measures of 1.3% of GDP in 2019 and revenue increasing measures of approximately 1% of GDP in 2020. Conditional on attaining the fiscal targets, the fiscal mix will be rebalanced through increases mainly in targeted transfers and public investment in 2019 (1.4% of GDP) and through tax reductions of 1.7% of GDP in 2020 and 1.0% of GDP in 2021. The debt to GDP ratio is projected to decline over the whole projection horizon on the back of primary surpluses, recovering economic activity and privatization revenue amounting to 2.5% of GDP, of which 1.2% of GDP is expected in 2017 and 1.1% of GDP in 2018 (Chart 40).
According to the 2018 Budget, the general government primary surplus (programme definition) is projected at 2.44% of GDP for 2017 (compared to 1.9% in the MTFS) and at 3.82% of GDP for 2018 (compared to 3.5% in the MTFS), against programme targets of 1.75% and 3.5% , respectively. The upward revision compared to MTFS reflects an improved fiscal outcome of the SSFs, which more than compensates for a downward revision in direct state tax revenues. The improvement in the programme primary balance between 2017 and 2018 mainly reflects lower state primary expenditure, higher state ordinary revenue, as well as an improved primary balance of the SSFs, on the back of legislated expenditure cuts, mainly in social payments. The general government debt is projected to increase to 179.8% of GDP in 2018 from 178.2% of GDP in 2017 due to the additional borrowing for arrears’ stock reduction, short-term debt reduction as well as the building of a cash buffer.
Fiscal reforms of the third programme have all been legislated and include inter alia: the full legal independence of ELSTAT; pension and income tax reform; indirect taxation; privatizations; an automatic contingent fiscal correction mechanism; the enhancement of electronic payments; as well as the MTFS 2018-2021.
Programme reviews: Following the closure of the first and second reviews in October 2016 and June 2017, respectively, efforts to close the third review by the next Eurogroup on 22 January 2018 are underway and, to this end, an omnibus bill was passed on 15 January 2018 containing all required prior
actions. On the fiscal front, milestones for the next review relate mostly to privatizations (including Hellinikon, gas distribution and the Salonika port) as well as the implementation of the new mobility and evaluation scheme for public sector workers. Progress on arrears’ clearance is also monitored
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and evaluated.
Financing: So far €40.2 bn has been disbursed under the new programme (including €5.4 bn for bank recapitalization costs and €5.1 bn for arrears clearance). Greece also returned to global capital markets in July after three years, raising €3 bn (yield: 4.625%; annual coupon rate: 4.375%). Of the €3 bn, around half represented a swap in exchange for bonds due to mature in 2019.
Debt relief measures: The Eurogroup of 24 May 2016 recalled the medium-term primary surplus target of 3.5% of GDP as of 2018 and agreed to assess debt sustainability with reference to the benchmark of 15% of GDP for Greece’s gross financing needs during the post programme period for the medium term, and 20% of GDP thereafter. The Eurogroup also agreed a first set of measures:
For the short term, including the smoothing of the EFSF repayment profile under the current weighted average maturity, the use of the EFSF/ESM diversified funding strategy to reduce interest rate risk without incurring any additional costs for former programme countries and a waiver of the step-up interest rate margin related to the debt buy-back tranche of the 2
nd
programme for 2017. For the medium term, it expects to implement a possible second set of measures including the
abolition of the step-up interest rate margin related to the debt buy-back tranche of the 2nd
programme as of 2018, the restoration of ANFA and SMP profits to Greece from 2017 onwards, liability management utilizing unused resources within the ESM programme and targeted EFSF reprofiling.
Finally, for the long term, it agreed to a contingency mechanism should gross financing needs exceed the benchmark which could entail measures such as further EFSF reprofiling and deferral of interest payments.
In this context, the Eurogroup of 5th December 2016 endorsed the full set of short-term measures on
the basis of proposals by the ESM and preparatory work by the EWG, which were adopted by the ESM on 23.1.2017. Finally, the Eurogroup of 15 June 2017 reconfirmed the commitments and principles contained in the statements of May 2016. In addition, specific mention was made to a possible deferral of EFSF interest and amortization of up to 15 years in the context of the medium-term measures. A growth-adjustment mechanism is envisaged to correct for differences between assumed and actual growth rates after 2018. The primary surplus target of 3.5% of GDP will be reduced to a primary surplus equal to or above but close to 2% of GDP during 2023-2060.
On 25 September 2017 the General Affairs Council decided to close the Excessive Deficit Procedure (EDP) for Greece based on the assessment in the Commission’s Spring 2017 Economic Forecast that the positive fiscal performance of Greece is durable.
In November 2017 Greece swaped €25.8 bn worth of greek government bonds issued in the period 2012-2017 with five new notes maturing between 2023-2042 in a bid to boost liquidity in the secondary market.
Short-term developments
General government figures – ESA 2010 (Chart 41) According to the Autumn 2017 EDP notification (23.10.2017), in 2016 the general government budget recorded a surplus of 0.5% of GDP compared to a deficit of 5.7% of GDP in 2015, and a primary surplus of 3.7% of GDP compared to a primary deficit of 2.1% of GDP in 2015. The improvement stems from both higher revenue (+3.0%) and lower expenditure (-8.7%). The revenue increase stems from higher current revenue (+5.9%) in all categories, compensating for a significant drop in capital revenue (-40.8%), the latter partly due to a base effect from the recording of motorway concessions in 2015. The increase in current revenue reflects, inter alia, the tax and social security reforms, a higher BoG dividend, a change in the recording of ANFA revenue, as well as beneficial effects from the intensified use of electronic payments. The decline in expenditure is primarily driven by lower capital expenditure (-52.9%), mainly reflecting the unwinding of banking support costs and, to a lesser extent, decreased public investment on the back of lower deliveries of military hardware. Current primary spending remained broadly stable. The general government debt increased in 2016 to 180.8% of GDP compared to 176.8% of GDP in 2015. Compared to the Spring notification the primary outcome was revised downwards by approximately 0.2% of GDP mainly reflecting higher social payments and capital spending as well as a downward revision in nominal GDP. 2017:H1 data show a general government deficit of 0.4% of GDP compared to a deficit of 1.0% of GDP in 2016:H1 and a primary surplus of 1.1% of GDP compared to a primary surplus of 0.7% of GDP in 2016:H1. Total expenditure decreased (by 0.9% of GDP, mainly social payments) compensating for the decline in total revenues (by 0.4% of GDP, mainly direct taxes). At the end of this period, general government debt stood at 171.5% of GDP against 180.8% of GDP at end 2016. The improvement reflects both debt repayment through intergovernmental borrowing as well as a denominator effect (Chart 42).
General Government cash balance (MoF): In January-November 2017 the consolidated general
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government outcome improved and reached a surplus of 1.2% of GDP, compared to a surplus of 0.8% of GDP during the same period last year and the primary balance came in at a surplus of 4.0% of GDP compared to 3.7% of GDP in the same period last year. Lower direct tax revenues (-2.2%), and lower transfers (-32.2% mainly from EU) were overcompensated by increased social security contributions (+5.6%), higher privatization revenue and lower primary expenditure (-1.5%; mainly cuts in pensions, transfers as well as purchases of non-financial assets).
Arrears accumulation (excluding pension claims): After a decrease of almost €1.2 bn in 2016, arrears stood at €4.9 bn at end 2016; subsequently in 2017, the stock of arrears flunctuated. It increased to around €6 bn at end August 2017 and decreased at end-November 2017 to around €3.9 bn. Nearly 25% of total arrears (excluding tax refunds) originate in the public healthcare system (EOPYY) (Chart 43).
Arrears payments (including pension claims): In July-December 2016 almost €3.1 bn was paid out for arrears clearance (of which €268 mn for pension claims). In January-November 2017 approximately €1.4 bn was paid out (of which €456 mn for pension claims).
MoF Central Government Debt at end-November 2017 amounted to €330.4 bn (or 185% of GDP) compared to €326.4 bn (or 187.3% of GDP) at end-Dec. 2016.
State budget execution (MoF): According to final data for 2017, the State budget recorded a deficit of 2.4% of GDP, compared to a deficit of 1.6% of GDP in 2016.
The primary balance recorded a surplus of 1.1% of GDP (Chart 44) compared to a surplus of 1.6% of GDP during the same period last year. The improvement reflects a decrease in ordinary primary expenditure (-3.9%) and in public investment expenditure (-5.4%).
The period targets were revised according to the estimates for 2017 included in the 2018 Budget report. The primary balance was significantly above the revised period target, due to the containment in ordinary primary expenditure (by €1.2 bn), in public investment expenditure (by €0.8 bn) and in tax refunds (by €0.2 bn). Ordinary revenue slightly overperformed (by €0.1 bn) though it was outweighed by a shortfall mainly in public investment revenue (by €1 bn) but also in privatizations revenue.
On account of an expected fiscal overperformance compared to the programme’s target in 2017 a one-off social dividend to low income individuals and vulnerable households amounting to €720 mn, a rebate of €315 mn of health contributions, and a grant of €360 mn to the Greek state energy company, PPC, to cover electricity subsidies for impoverished households were disbursed largely in December 2017.
7. MONEY, CREDIT AND FINANCIAL MARKETS
Medium-term trends and outlook
The strong deposit outflows ceased after the imposition in mid-2015 of restrictions on deposit withdrawals and cross-border transfers of funds and the agreement on the third economic adjustment programme. Bank recapitalisation in 2015, the conclusion of the first and the second programme reviews in June 2016 and June 2017 and the gradual relaxation of capital controls represent important steps towards the restoration of confidence in the Greek banking system and the recovery of bank deposits. The successful completion of remaining reviews of the programme, the expected strengthening in economic activity and the progress with the management of non-performing loans should further strengthen the deposit base of banks and generally bank liquidity. Overall, deposits of the domestic non-financial private sector with Greek banks have increased by €8.5 bn (or 7.3%) between end-June 2015 and November 2017.
Since the imposition of capital controls and until October 2017, a total of €9.0 bn of funds previously invested by Greek residents (firms and households) in financial assets abroad, including bank deposits (€4.7 bn) and equity securities including mutual fund shares (€4.1 bn), has been repatriated.
Since mid-2016 bank credit to non-financial corporations shows signs of stabilisation, broadly in line with the evolution of economic activity. However, the contraction of bank loans to households continues, albeit at a decelerating pace. The expected acceleration in economic growth and improvements in the management of non-performing loans are expected to have a positive impact on bank credit.
Financial resources, partly intermediated through local banks, have been directed to non-financial firms in accordance with various European initiatives. Specifically, the EIB, the EIF, the EBRD and the Hellenic Fund for Enterprise and Development (ΕΤΕΑΝ) co-finance or guarantee loans channelled through commercial banks, mostly to SMEs and secondarily to households. The EIB also provides export-guarantees to SMEs. New programmes (activated since late-2016) include:
i) ETEANs “Entrepreneurship Fund II” and the new Household Energy Saving programme II with an initial budget of €400 mn and €250 mn, respectively;
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ii) the new Fund of Funds, “EquiFund” with an initial budget of €260 mn; iii) approx. €1 bn loan agreements between the EIF and Greek banks under the European
Commission’s initiatives “COSME” and “InnovFin”;
iv) the “Trade Finance Facility II” by the EIB; and v) more than €2 bn in credit lines signed between the EIB and Greek banks over the past two
years which support lending to small and medium-sized enterprises (SMEs) and Midcaps across the country.
Deposit rates have been on an asymptotically declining trend.
Average bank lending rates to corporations have similarly been on a declining path, recently approaching historical lows. The average rate on household credit has been on a moderately upward trajectory since mid-2015.
Greek government bond yields fell substantially during 2017, due to progress made in implementing the economic adjustment programme and the exchange of old GGBs with new notes, which resulted in increased tradability of GGBs, as concentration of GGB holdings in fewer maturity segments succeeded in deepening the market, leading to a depression of liquidity risk premia for benchmark notes. In part, as a result of the swap, at the beginning of 2018 yields on GGBs stood at levels around 300 to 700 bps lower, according to maturity, than at the beginning of 2017, with yields on shorter term notes having fallen the most.
Bonds issued by Greek non-financial corporations have decoupled from Greek government bonds during 2017 and have largely followed developments in their European peers’ bonds, while they have also benefited from the improving market sentiment towards Greek assets; as a result, GCB yields followed an almost uninterrupted downward trend, falling by around 390 bps in 2017 to historically low levels.
Short-term developments
Private sector deposits: In November 2017, bank deposits of the non-financial private sector recorded a small rise by €0.2 bn, stemming mainly from corporate deposits (+€0.17 bn) while household deposits changed only marginally (+€0.07 bn) (Chart 45). Since end-May 2016, when the first review of the programme was concluded, bank deposits of non-financial corporations and households have increased by almost €8.6 bn (or 7.4%) (nfcs: +€4.4 bn, households: +€4.2 bn).
In November 2017, the annual rate of change of bank credit to non-financial corporations became marginally positive standing at +0.04%; it has been fluctuating around zero since mid-2016. The annual contraction of bank credit to households decelerated somewhat (-2.2%, from -2.3% in October 2017) (Chart 48).
The Bank of Greece’s small-scale Financial Conditions Index (FCI) which tracks whether financial conditions are looser or tighter than their long-run average (depicted by 0) has been broadly stable since 2012, fluctuating around a level that is very low by historic standards due inter alia to the tight funding conditions for banks. The deterioration associated with the uncertainty in the last quarter of 2014 and the first half of 2015 culminating in the imposition of capital controls gradually began to reverse from August 2015 and the overall trend since has been positive (Chart 50).
In 2017, bank lending rates to non-financial corporations have decreased on average compared to the previous year, while the respective rates for households have moved somewhat higher. Similarly, in November 2017, interest rates decreased for corporate credit (down by 42 bps to 4.33%) but rose for loans to households (mortgage rate up by 35 bps to 2.92%, rate on consumer credit down by 10 bps at 9.40%) (Chart 51).
During the first half of 2017, deposit rates continued to decline but thereafter they have remained rather stable. In November 2017, the time deposit rate offered to households declined at 0.59% (Chart 51).
Bank Lending Survey results for Greece (2017:Q3 compared to 2017:Q2):
Credit standards as well as terms and conditions remained unaltered with respect to all loan categories.
The demand for consumer credit remained unchanged but the demand for housing, as well as for corporate, credit expanded. The responses to the survey questionnaire attribute the shift in the demand for credit to non-financial corporations to a need to finance investment expenditures.
Answers to the ad hoc questions confirm that the ability of banks to attract inflows of retail deposits has improved.
With regard to the effect of unconventional monetary policy, the overall view of Greek banks is that repercussions of their participation in the APP are confined to an improvement in bank liquidity (and this view is not widely held—most banks see no effect at all). At present, the increase in liquidity enables repayment of outstanding borrowing from the central bank but six-months into the future it is expected to sustain an expansion in corporate lending.
15
SAFE results: Apr.-Sep. 2017 compared to October 2016-March 2017
The external financing gap faced by SMEs in Greece remained the highest in the euro area but contracted considerably since the previous round (11% down from 24%).
The reported contraction in the availability of bank loans to Greek SMEs moderated significantly compared to the previous round (net percentage: -3% from -23%) as did the expansion in their needs for bank loans (net percentage: 19% from 31%) (Chart 55).The availability of trade credit became positive for the first time since the beginning of the survey (net percentage: 4% from -14%).
The percentage of firms which applied for a bank loan remained rather low (22% from 21%) and the rejection rate decreased to 16% (from 18%). The approval rate (percentage of bank loan applications satisfied mostly or in full) increased to 50% (from 41%).
The moderation in the contraction of the supply of credit is attributed to a positive influence of firm-specific prospects and of the willingness of banks and business partners to provide credit. At the same time, the influence of the general economic outlook and access to public financial support (including guarantees) became less negative.
The net percentage of SMEs reporting increases in bank lending rates decreased and was the lowest relative to all previous rounds, but the balance of firms reporting increases in collateral requirements and in other costs of bank financing remained high.
Greek SMEs reported, for the first time, improvements in turnover (net percentage: 4% from -13%) but continued to report reductions in profits (net percentage: -31% from -50%). SMEs used financing mostly for working capital and for building inventories (45% from 36%), but also for refinancing/paying off obligations (30% from 32%) and for fixed investment (27% from 23%).
Greek government bonds: The entire GGB yield curve stood lower on 17 January 2018 (Chart 56), as a result of benign market sentiment following the swap of old notes for new ones and press reports regarding upcoming issuances. The yield on the newly issued ten-year GGB stood at 3.75% on 17/1/2018, down 27 bps since 2/1/2018; the 40 bps fall in the yield for the off-the-run 10-year note was sharper compared to the yield of the on-the-run 10-year bond, indicating a suppression of liquidity premia. The yield of the 5-year GGB fell by more, standing at 2.8% on 17/1/2018, i.e. down by 64 bps compared to 2/1/2018. The yields of shorter-term notes fell by relatively less, with the yield on the 2-year falling by 21 bps to 1.45% on 17/1/2018; as a result, the term spread between10-year and 2-year notes fell slightly to 230 bps (Chart 57). As Bund yields rose in the period under review, in tandem with developments in US yields, the spread of the ten-year Greek sovereign bond vis-à-vis the Bund fell considerably (17/1/2018: 321 bps, down by 41 bps).
Corporate bonds: Greek Corporate Bond (GCBs) yields also fell somewhat in the two-week period under review, benefiting from improved market sentiment towards Greek assets, over-performing other euro-area corporate bond yields with comparable rating. Thus, the yield on BoG’s GR NFC bond index, which measures the weighted average yield on international bonds issued by large industrial companies residing in Greece, fell by 16 bps, compared to 2/1/2018, to 3.17% on 17/1/2018. The spread of the GR NFCs bond index vis-à-vis the iBoxx EA NFCs BBB marked a similar fall (to 200 bps on 17/1/2018, Chart 58) as yields on euro-area corporate bonds issued by NFCs with comparable rating remained broadly unchanged, on average.
Greek equities: prices on the Athens Exchange posted strong gains in the two weeks under review, driven by a broad rise in industrial, utilities and banks’ share prices. The general index rose by 2.81% between 2/1/2018 and 17/1/2018 ( Chart 59); the index of Greek banks’ share prices rose by 2.76%, with bank-specific returns being mixed (2-week returns on 17/1/2018: Alpha bank: 4.84%, Attica bank: -25%, Eurobank: -1.14%, NBG: 6.25%, Piraeus bank: 0%). Share prices of industrial companies over-performed, compared to the market (2-week return: 2/1/2018 to 17/1/2018: 9.26%); utilities also rose more than the market (2-week return: 5.831%). The already subdued volatility of daily returns receded further (0.78% from 1% in the previous period), while the intraday range remained broadly unchanged (at 1.3%) and the volume of transactions in the Athens bourse remained near the 2017 average (average daily transactions for the past two weeks: €63mn; average daily transactions in 2017: €58 mn).
8. BANKING SECTOR
Medium-term trends and outlook
The four significant Greek banks have announced financial results for the third quarter of the 2017 fiscal year. The overall picture is deemed positive. Based on consolidated figures, for the January-September period pre-provisioning income amounted to €3.1 bn, recording a 9.3% increase on a y-o-y basis, while pre-tax income was €274 mn compared to €201.9 mn profits in the same period of 2016.
The key factors making a positive contribution to the results were the reduction in interest expenses (due to declines in the cost of deposits and decreased reliance on ELA financing as well as lower cost
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of State guarantees, due to reduced usage of pillar II bonds of L. 3723/2008), the increase in income from fees and commissions, and some one-off income items from the sale of businesses. Also, further improvement in managing operating costs weighed positively on the results. On a y-o-y basis, operating income rose by 1%, while operating expenses recorded a reduction of 4.4%. It is noted that loan loss provisions for the January-September period rose by 4.2% compared to the same period in 2016.
The CET1 ratio was preserved, around 17.1%, comfortably above the EU average (14.3% as of June 2017 according to EBA).
Regarding asset quality, the stock of non-performing exposures at end-September 2017 decreased by 7.6% compared to end-March 2016, when the stock of NPEs reached its peak. The full implementation of the actions agreed between the European Commission acting on behalf of the European Stability Mechanism, the Hellenic Republic and the Bank of Greece in facilitating the management of troubled assets is crucial in order to tackle the problem efficiently.
Cross-border payments from Greece are taking place following ministerial decisions authorizing specific categories of transactions and in most cases requiring approval by the Banking Transactions Approvals Committee. A number of ministerial decisions have gradually relaxed the restrictions in place.
Short-term developments
Alpha Bank announced that together with Alpha Bank Romania they have entered into a definitive agreement for the sale of a €360mn non-performing wholesale loan portfolio. The portfolio will be acquired by entities financed by a consortium of international investors including Deutsche Bank AG, funds advised by AnaCap Financial Partners LLP and funds advised by APS Investments S.à.r.l. According to the bank, the combined effect of the aforementioned transaction, together with the sale of a €50mn non-performing retail loans portfolio to the Norwegian group B2Holding in 2017:Q3, is expected to weigh positively on the bank’s financial figures.
Table 2: Value added decomposition, seasonally adjusted
2016
Q3Q2
2017
Q1 Q22014
2014
Q4Q1Q3
2015
2016
Percentage changes (chain linked volumes, reference year 2010)
Q3Q4 Q4Q3 Q1Q2 2015Q1 Q2
CHART BOOK
1. OUTPUT, DEMAND AND CONJUNCTURAL INDICATORS
Source: ELSTAT (quarterly national accounts December 2017).
Source: ELSTAT (quarterly national accounts December 2017).
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2016 2017f 2018f 2019f
GDP (constant prices) -0.2 1.6 2.4 2.5
Private consumption 0.0 1.0 1.2 1.1
Government consumption -1.5 0.6 -0.1 3.7
Gross fixed capital formation 1.6 5.7 11.5 9.3
Exports of goods and services -1.8 6.7 5.6 4.6
Imports of goods and services 0.3 5.9 4.6 4.5
Changes in inventories 0.6 0.0 0.0 -0.1
HICP 0.0 1.2 0.9 1.0
HICP excluding energy 0.5 0.6 0.7 1.1
Total employment 1.8 2.3 2.4 2.1
Unemployment rate (% of labour force) 23.5 21.8 19.9 18.3
Current account (% of GDP) -1.1 -0.1 -0.4 -0.1
Table 3: Macroeconomic projections for Greece
(change over previous period)
Percentage changes on a year earlierRelease
date2016 2017f 2018f 2019f
OECDNov. 2017 -0.2 1.4 2.3 2.0
European CommissionNov. 2017 -0.2 1.6 2.5 2.5
IMFOct. 2017 0.0 1.8 2.6
ConsensusJan. 2018 0.0 1.2 2.0 2.1
Table 4: Projections for Greek GDP by international organizations
Sources: ELSTAT and BoG.
Sources: ΟECD( Economic Outlook, November 2017), European Commission (European Economic Forecast,
November 2017), IMF (World Economic Outlook, October 2017 ), Consensus Economics (Consensus Forecasts,
January 2018).
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Chart 3: Greek real gross value added by economic activity (index: 2009:Q1=100)
Chart 4: Gross value added by sector of economic activity (percent contributions)
Source: ELSTAT, National Accounts, December 2017 (provisional, sa data).
Source: ELSTAT, National Accounts, December 2017 (provisional, sa data).
Chart 1: Decomposition of Greek real GDP (percent)
Chart 2: Decomposition of gross fixed capital formation by investment component
Source: ELSTAT, National Accounts, December 2017 (provisional, sa data).
Source: ELSTAT, National Accounts, December 2017 (provisional, nsa data, at current prices).
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Chart 5: Household disposable income growth and components (percent contributions)
Chart 6: Compensation of employees growth and components (percent contributions)
Source: : ELSTAT, non-financial accounts of institutional sectors and ECB "Household Sector Report", November 2017. Note: Taxes = Current taxes on income, wealth + Taxes on production and imports (including ENFΙΑ).
Source: ELSTAT, National Accounts.
Chart 7: External financing of NFCs by instrument (flows, 4 quarter moving sum, EUR bn)
Chart 8: Greek and Euro Area Economic Sentiment Indicator
Sources: ECB (SDW), Bank of Greece, Financial Accounts. *Does not include corporate bonds issued by greek companies'
subsidiaries residing abroad. In the period 2012-2017 these amount to €7 bn. **Includes trade credit and advances and other accounts
receivable/payable.
Source: European Commission.
21
Chart 9: PMI overall index and new export orders component (3-month moving average)
Chart 10: Industrial confidence, production, employment and export orders (balances; 3-month moving averages; sa data)
Source: Markit. Source: European Commission (business and consumer surveys).
Chart 11: Industrial production and industrial confidence indicator (annual percentage change of 12-month moving average of industrial production index and balance)
Chart 12: Retail sales, retail sales confidence and consumer confidence indicators (annual percentage change and balances)
Sources: ELSTAT (for industrial production index) and European Commission (for industrial confidence indicator).
Sources: ELSTAT (for volume of retail sales excl. fuel) and European Commission (for confidence indicators).
22
Chart 13: Greek and Euro Area Services Confidence Indicator (balance)
Chart 14: Tourist activity indicators (annual percentage changes and balance)
Source: European Commission (business and consumer surveys).
Source: Frontier Survey of the Bank of Greece.
2. STRUCTURAL REFORM INDICATORS
Chart 15: Number of procedures to start a business Chart 16: Number of days to start a business
Sources: Doing Business 2018, 2014, 2009, World Bank and BoG calculations.
Notes: On the left-hand scale, the higher the value, the more costly it is to start a business as measured by the number of procedures (Chart 14) / the time needed (Chart 15) to open a business. As a measure of the reforms implemented, the right-hand scale shows the change in the number of days to open a business for two sub-periods. A change greater (less) than zero means the country moves closer to (further away from) best practice. No value is available for MT for 2008.
23
Chart 17: OECD Employment Protection Legislation Index
Chart 18: Responsiveness to OECD Going for Growth recommendations
Sources: OECD, EPL index (version 3) and BoG calculations. Notes: EPL index varies from 0 to 6, where lower values indicate a lower degree of employment protection through legislation. The right-hand scale shows the change in the index between 2008-2013. A change greater (less) than zero means the country moves closer to (further away from) best practice.
Source: OECD Going for Growth 2010, 2013 and 2017.
Chart 20: Private sector dependent employment flows (cumulative net flows; number of new jobs)
Source: ELSTAT, Labour Force Survey. Source: ERGANI.
24
Chart 21: Total, youth unemployment rate and share of long-term unemployed (in percent)
Chart 22: Nominal ULC growth and contribution of components
Source: ELSTAT, Labour Force Survey. Source: ELSTAT, Annual National Accounts. Note: Labour productivity is GDP per hour worked. Hourly compensation is compensation of employees per hour worked (by employees).
4. PRICES
Chart 23: Inflation (percent, y-o-y) Chart 24: HICP and main contributions
Sources: ELSTAT and Bank of Greece calculations. Source: ELSTAT and Bank of Greece calculations.
25
Chart 25: Determinants of domestic inflation Chart 26: House price index (index 2007=100 and annual percentage change)
Source: ELSTAT and Bank of Greece calculations. Source: Bank of Greece.
Chart 27: Prime Retail Price and Rent Indices (indices 2010=100)
Chart 28: Prime Office Price and Rent Indices (indices 2010=100)
Source: Bank of Greece. Source: Bank of Greece.
26
5. EXTERNAL BALANCES
Chart 29: Components of the current account as % of GDP
Chart 30: Real exports of goods and services (index 2009=100, sa)
Source: Bank of Greece, BoP statistics. Sources: Bank of Greece (BoP statistics) and Eurostat
(for EA 19).
Chart 31: Real exports of goods (index 2009=100, sa )
Chart 32: Real exports of services (index 2009=100, sa )
Sources: Bank of Greece (BoP statistics) and Eurostat
(for EA 19).
Sources: Bank of Greece (BoP statistics) and Eurostat
(for EA 19).
27
Chart 33: Greek exports by product (% share of each product category in total Greek exports)
Chart 34: Greek imports according to their use (% share in total imports)
*January-September 2017 period.
Source: Eurostat, Comext database.
* Not otherwise classified.
**January-September 2017 period.
Source: Eurostat, Comext database.
Chart 35: Non-residents’ Direct Investment flows in Greece by sector of economic activity (million euro)
Chart 36: Greek goods export market shares
((Imports from Greece as percentage of world imports; Index 2000=100))
* provisional data
Sources: Bank of Greece, Statistics Department. Source: IMF - Direction of trade statistics database.
28
Chart 37: Greece: Price and cost competitiveness indices (index 2000=100; quarterly, period averages)
Chart 38: Euro area countries: Unit labour cost competitiveness indices (index 2000=100; quarterly, period averages)
Sources: ECB, Harmonized Competitiveness Indicators based on ULC in total economy.
6. FISCAL
Chart 39: General Government Primary Budget Balance under the programme definition (% of GDP)
Chart 40 : Gen. Government gross Debt to GDP ratio decomposition (percentage points)
Source: Ministry of Finance. * primary balance according to BoG estimates. Note: The definition of the primary budget balance under the programme deviates substantially from the EDP. Most notably, it excludes the cost of the banking support, SMP/ ANFA profits-related transfers from Member States and some privatisation revenues.
Source: Ministry of Finance, ELSTAT.
* projections as published in 2018 Budget.
29
Chart 41: General Government deficit decomposition (% of GDP)
Chart 42: General government primary balance (quarterly, cumulative) (% of GDP)
* projections as published in the 2018 Budget.
Sources: ELSTAT, Ministry of Finance. Source: Ministry of Finance.
Chart 43: General Government stock of arrears (incl. tax arrears) (EUR mn)
Chart 44: Evolution of State budget primary balance against MoF's period targets in 2016-2017 (EUR mn)
Source: Ministry of Finance. Source: Ministry of Finance.
30
7. MONEY, CREDIT AND INTEREST RATES
Chart 45: Bank deposits* of non-financial
corporations and households (in EUR bn)
Chart 46: Bank deposits of non-financial corporations
and households (annual percentage change)
*As of December 2016, deposits held in the Consignment Deposits and Loan Fund by the private sector (€4.2 bn) were excluded from the outstanding amount of bank deposits, as the institution has been reclassified from the financial sector to the general government sector. The net flows of deposits are not affected by such reclassifications.
Source: Bank of Greece.
Source: Bank of Greece.
Chart 47: Central bank financing to Greek commercial
banks (in EUR bn, end of month)
Chart 48: Bank credit to non-financial corporations
and households (annual percentage change)
Source: Bank of Greece. Source: Bank of Greece.
31
Chart 49: Bank credit to non-financial corporations
and households (outstanding amounts in EUR bn)*
Chart 50: Small-scale Financial Conditions Index (zero reflects long-run mean; an increase (decrease) reflects
improvement (deterioration). Last data point is provisional)*
*As of December 2016, loans extended by the Consignment Deposits
and Loan Fund (housing loans: €3.6 bn and business loans: €0.2 bn)
were excluded from the outstanding amount of bank credit as the
institution has been reclassified from the financial sector to the general
government sector. Net flows and annual growth rates of bank credit
are not affected by such reclassifications.
Source: Bank of Greece.
Source: Bank of Greece.
Chart 51: Bank interest rates of new loans and
deposits (annual percentages, weighted averages of the
various loan and deposit sub-categories)
Chart 52: Changes in banks' credit standards applied to
the approval of term loans or credit lines to non-financial
enterprises (average of responses)
*Before June 2014 interest rates agreed in the context of most loan modifications were recorded as interest rates on new lending. As of June 2014, interest rates in the context of loan modifications, if set below market conditions in response to financial distress of the borrower, are no longer reflected in the series for the bank lending rate.
Source: Bank of Greece. Source: Bank of Greece, ECB, Bank Lending Survey.
32
Chart 53: Changes in demand of non-financial
enterpises for term loans or credit lines
(average of responses)
Chart 54: Changes in the access of banks to market
funding (average of responses)
Source: Bank of Greece, ECB, Bank Lending Survey. Source: Bank of Greece, ECB, Bank Lending Survey.
Chart 55: Change in the needs and the availabilbity of bank term loans
(net percentage of firms*)
Source: EC/ECB, Survey on the access of finance to enterprises in the euro area.
33
Chart 56: Spreads of 10-year government bond
yields over comparable Bunds
(monthly data; basis points)
Chart 57: Greek sovereign yield curve
Source: Thomson Reuters. Sources: Thomson Reuters (data); Bank οf Greece
calculations (spline fitting).
Chart 58: GR NFCs bond index & iBoxx indices for
EA non-financial corporates
(daily data; yields in percentage points)
Chart 59: Athens stock exchange indices
(monthly data)
Bank index rebased (divided by 100).
Source: (GR index) Bank of Greece; (iBoxx indices)
Thomson Reuters, Datastream.
Source: Thomson Reuters, Datastream.
34
This update: 19 January 2018, Next update: 2 February 2018
** Eurostat definition.*** ELSTAT "Index of Wages" for the total economy excluding agriculture and private households.
(*) During the period 29/6/2015-31/7/2015 the Athens Exchange was closed due to the bank holiday
Table 1: Main macroeconomic indicators for Greece
1. Economic activity
National Accounts variables on an annual and on a quarterly frequency are seasonally adjusted by ELSTAT. National Accounts based definitions for
employment. Employment data on a quarterly frequency are seasonally adjusted by Eurostat. Confidence indicators are net percentage balances of positive
and negative replies to each situation described by the variable.
35
This update: 19 January 2018, Next update: 2 February 2018
Confidence indicators are net percentage balances of pos i tive and negative repl ies to each s i tuation described by the variable. For a l l indices except for those referring to the
unemployment rate and prices , a higher va lue suggests an improvement.
36
This update: 19 January 2018, Next update: 2 February 2018
6.2 New Export Orders 53.5 42.0 48.7 48.5 43.8 47.2 50.1 50.1 49.5 51.1 49.8 51.4 51.9 54.6Confidence indicators are net percentage balances of pos i tive and negative repl ies to each s i tuation described by the variable. For a l l indices except for those
referring to the s tocks of finished goods , a higher va lue suggests an improvement.
Table 4: Key indicators for Industry in Greece
1. Gross value added (at 2010 prices)
38
This update: 19 January 2018, Next update: 2 February 2018
4.2.1 Assessment of business situation over the past 3 months bln 18.2 -9.0 -10.6 12.9 1.9 10.4 24.5 14.8 21.9 28.9 22.8 17.6 12.2 14.5
4.2.2 Evolution of demand over the past 3 months bln 17.6 -13.0 -11.9 9.7 1.0 9.3 16.6 11.9 13.4 19.5 16.8 14.4 10.0 11.3
4.2.3 Evolution of demand expected over the next 3 months bln 20.7 -13.7 -3.9 10.3 2.4 9.6 14.4 14.8 16.7 20.2 6.3 11.3 18.7 14.3
Table 5: Key indicators for Services in Greece
Confidence indicators are net percentage balances of pos i tive and negative repl ies to each s i tuation described by the variable. For a l l indices except for those referring to the s tocks of
finished goods , a higher va lue suggests an improvement.
39
This update: 19 January 2018, Next update: 2 February 2018
Savings over next 12 months IOBE/EC -8.2 -76.3 -79.9 -81.8 -84.8 -84.8 -79.0 -78.5 -80.6 -80.5 -75.8 -78.6 -79.5 -77.5
Unemployment over next 12 months IOBE/EC 43.0 46.2 61.6 51.3 62.2 58.2 45.1 39.9 44.1 45.2 46.0 42.3 41.3 36.1
Confidence indicators are net percentage balances of pos i tive and negative repl ies to each s i tuation described by the variable. For a l l indices except for those
referring to the s tocks of finished goods and the unemployment rate, a higher va lue suggests an improvement.
Table 6: Business and consumer surveys (balances, seasonally adjusted data)
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