The Greek economy is in a tight spot in terms of investment interest, showing signs that could lead to a creditless recovery. It is necessary for the country to facilitate investments in order to accelerate economic growth.
Survey key points:
Anemic recovery due to investment penury:
Following a recessionary period, there are cases where the economic recovery without the corresponding credit leverage is possible (“Creditless recovery”). Studies show that there are examples of economies that bounced back without the aid of credit and entered a period of creditless recovery, which is however about 40% weaker than a recovery with credit. Greece is likely to experience a creditless recovery as official financial data show.
Structural difficulties in realising investments:
Investment needs for 2017-2022, compatible with rapid economic growth trends, are estimated at around € 270bn, but foreseeable funding flows are not enough to cover them. Greek companies have difficulty in accessing funds. The structural difficulties in mobilising capital consist of low returns, credit squeeze, declining savings, nonperforming loans, and dwindling “soft” financing.
Investment gap in Greece:
Investments in Greece are historically connected to GDP and from 2009 onwards they collapsed. Historically, Greece has not attracted systematically significant foreign funds and was dependent on domestic capital, leading to an investment gap with negative impact on competitiveness and growth. The systematic inability of Greece to attract significant foreign investments is crucial, since Greece will have to bridge the investment gap with Greek funds.
Policies towards recovery:
It is important that Greece introduces consistent policies that promote investment in order to facilitate economic growth. Such policies should develop in 8 dimensions:
- strengthening of confidence in institutions,
- active management of nonperforming loans,
- accelerating investment in infrastructure projects,
- restructuring of the real estate market,
- new architecture for the financial sector,
- institutional equity mobilisation,
- increase in "soft" financing, and
- the adoption of a stable tax system.
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Director, Internal Firm Services, Marketing & Communications, Athens, PwC Greece
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