Greece Business Forecast Report Q2 2008

Publication Date	April 2008
Publisher	Business Monitor
Product Type	Report
Pages	52
ISBN Number	1745-0551
Product Code	BMI01531

Buy this product or for assistance call +44 20 7060 7474

PDF £250.00$416 | €280

FAX Order above formats by FAX

Summary

Challenges For New Democracy To Take Centre Stage

Greek Premier Costas Karamanlis is using the start of his second term to push ahead with reform.

His approach is four-pronged: overhauling a pensions system about to enter institutional crisis; reforming education and breaking the state's monopoly on universities; pursuing privatisation of state assets in the banking and telecoms sectors; and encouraging foreign investment in the country's ports. We believe that the greatest headway will be made in the areas of pensions and privatisations, under experienced Finance Minister George Alogoskoufis. Proposals to consolidate the myriad of 150+ pension funds down to -6 under new professional management, as well as raising the retirement age in some jobs, and greater disincentives for early retirement, all look likely to come into effect later this year.

Perhaps the government's biggest Achilles' heel will be continued corruption allegations, coupled with slow progress in raising living standards and improving domestic employment prospects.

However, 2008 is a fresh start for Karamanlis, and the best time to press ahead with his reform agenda. BMI foresees a solid foundation for the ND party this year, despite persistent public protest.

Furthermore, the greater flexibility Karamanlis has introduced into the labour market, as well as his reduction in corporate taxes, should keep bolstering employment. We caution though, that high consumer debt, as elsewhere in Europe, is likely to remain a problem.

Among the most important long-term threats for economic growth are worries about falling international competitiveness, and a failure to spread wealth among the country's regions. BMI's primary concern over the forecast period is the impact of rising costs on the heavily price-competitive tourism sector, currently responsible for some 15% of national income. There is also evidence that while national GDP per capita is increasing, some regions are being left behind, due to problems such as corruption in local administrations. Per capita GDP is 96% of the eurozone average, but in six regions it is below 75% of the bloc average.

From a superficial perspective, Greek banks seem well-placed to weather financial storms in 2008.

Last year national Bank of Greece and alpha Bank, the first and second largest by market capitalisation, reported a 70% and 54% increase in net profits respectively. Most of the major Greek players have little or no exposure either directly to sub-prime mortgages, or to credit-linked instruments based on bundled debt originating in the US. However, slowing consumer spending in 2008 and 2009 will curb profits. Furthermore, BMI is worried about the exposure to credit risk through Greek banks' aggressive exposure into new markets such as Romania, Bulgaria and Serbia.

Content

Executive Summary
- Challenges For New Democracy To Take centre Stage
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Karamanlis Sets Out His Stall: Pensions First
- Re-elected Greek Prime Minister Costas Karamanlis of the New Democracy (ND) party has made some
- encouraging first steps in the opening six months of his second term in office.
- Foreign Policy
- Living Standards Weigh Heavily
- Greece has made progress in recent months in its relations with Turkey, which will prove beneficial for both
- trade and energy security.
Chapter 2: economic Outlook
- SWOT Analysis
- BMI economic risk ratings
- Introduction
- Over-exposed- How Will The credit crunch Play Out in Greece?
- The Greek economy is well-braced for rising global risk aversion, and slowing growth in major western European
- trade partners.
- Economic Activity
- A Four Percent Zenith
- We expect Greek GDP growth to average just over 3.2% in the coming three years, well below the 4.0%
- achieved in 2007.
- Monetary Policy
- Pressure On Wage Settlements This Year
- February CPI in Greece leapt up to 4.4% y-o-y, from 3.9% in January, and we believe this year will see the
- strongest price pressures since 2005.
- Fiscal Policy
- Pensions: Not The right Answer Yet
- The government faces significant challenges reducing the budget deficit this year, and strong opposition to
- pension reforms mean changes are not likely to be wide-reaching enough. We do not believe a balanced budget
- by 2010 will be achieved.
Chapter 3: Special report
- Looking Beyond 2008
- The Future Of The World, In Three Acts
- We believe that a substantial, multi-year shift in the US external accounts is under way. A weak US dollar and
- subdued domestic consumption should lead to a narrowing in the US's structural current account deficit.
- US: The rebalancing Act
- China: What If We're All Wrong?
- Our core Scenario For china
- We are retaining our positive headline growth projections for China across the forecast period to 2012, with our
- expectations of the continued success of the urbanisation process and export-driven growth model underpinning
- our assumptions.
- Japan: Immigration Key To Long-Term Growth
- Demographic Woes Portend Long-Term Decline
- Immigration remains the only realistic way that Japan can overcome its long-term economic challenges.
Chapter 4: Business Environment
- SWOT Analysis
- BMI Business environment risk ratings
- Business environment Outlook
- Institutions
- Infrastructure
- Operational risk
Chapter 5: Business Environment
- Freight Transport
Executive Summary
- BMI is forecasting that the Greek freight transport sector will grow at an average annual rate of 4.2%
- over the 2008-2012 period.
- Food & Drink
Executive Summary
- Thanks to rising disposable incomes and the general trend upwards in all types of consumer spending
- BMI anticipates MGR sales growth of 11.0% between 2007-2012 to reach US$9.89bn.
List of Tables
- Table: cabinet List
- Table: economic Activity
- Table: Monetary Policy
- Table: Fiscal Policy
- Table: BMI Business And Operational risk ratings
- Table: BMI Legal Framework ratings
- Table: Greece: Annual FDI Inflows
- Table: Top export Destinations, US$mn
- Table: Freight carried
- Table: Greece Mass Grocery retail - Value Sales by Format - Historical Data & Forecasts