Greece Infrastructure Report Q2 2009

A growing budget deficit and burdensome public debt are severe threats to the Greek economy. They are also a major constraint on the government as it attempts to tackle the coming recession. This continues to impede the government's ability to implement stimulus plans like other European peers, leaving the overall outlook for investments in infrastructure unchanged for this quarter.

In BMI's Q209 Greece Infrastructure Report, we forecast that construction sector real growth will continue along the downward trend it embarked on in 2008 as revised data from the national statistics agency revealed.

Little activity has been recorded in the infrastructure sector in the past quarter; while the intentions and capabilities gap for public private partnerships (PPP) is widening as the crisis deteriorates. The industry took a heavy blow when Hutchison walked away from the Thessaloniki port concession in December 2008, and the subsequent cancelation of the tender in March 2009 left the government to foot the bill for the expansion projects. The upcoming litmus test for the industry will be the launch of the tender for concession for the Heraklion airport in Crete.

Private sector involvement becomes more important when looking at macroeconomic indicators: The budget will come under strain from falling revenues and according to BMI forecasts, the ballooning external debt of the government will slow short-to-medium term growth, because the government has to revise its debt obligations and fiscal responsibilities, potentially slowing developments in the infrastructure sector. This will be accentuated further with liquidity drying up rapidly in the financial system, making raising capital extremely difficult in 2009 and 2010.

Major players in the Greek infrastructure industry include locals Elliniki Technodomiki-Aktor-TEB Group, J&P-AVAX, Terna, Mytilineos, Aegek and Athena, some of which also have significant operations abroad, mainly in the Balkans and Middle East. We anticipate that expansion abroad will become an even greater of part of corporate strategy in the coming years, as it will help offset the downturn in Greece. However, it should be noted that with the possible exception of Saudi Arabia and Qatar, the rest of the Middle East and the entire Balkan region does not look too promising for 2009-2010 either.