Greece Infrastructure Report Q3 2008

The construction sector is forecast to make up 12.17% of GDP in 2012, up from 9.71% that is forecast for 2008. This highlights the significance that the sector plays in the economy of Greece. The expected contraction of the sector will therefore have a widely felt effect on the wider economy. In BMI's Q308 Greece Infrastructure Report, we forecast that construction sector real growth will go through an abrupt boom and bust period in the coming years, before it collapses to 0.79% in 2012.

The double threat of the global credit crisis and the ballooning external debt of the government will slow short-to-medium term growth, as the government has to revise its debt obligations and fiscal responsibilities, potentially slowing the developments in the infrastructure sector.

The European Union (EU) has substantially funded and aided the development of Greek infrastructure.

Major projects currently under way in the country span roadways, railways and airports, as well as telecommunications and energy segments. The number of public-private partnerships is also growing, following the ratification of a new PPP Law in 2005, which has harmonised and unbundled legislation in Greece, and the subsequent establishment of a PPP Unit to oversee the implementation of several pilot projects.

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 the Balkans and Middle East.

However, growth in the Greek construction industry has been sluggish. It also suffers from certain drawbacks that have hindered its long-term growth potential. Since the majority of the Greek projects are financed by the EU, any reduction in fund allocation can have a significant impact on the industry.

Earlier, Greece had to contend with only a few countries for EU funds. However, the entry of eastern European countries into the EU now means Greece is one of several 'poor' countries seeking EU funds.

Moreover, the nation is plagued by widespread delays in project completion and inadequate private investment. Further, bureaucracy hinders the pace of developmental work.

That notwithstanding, BMI forecasts that Greece's construction industry to reach a value of US$46.95bn by 2012, given a consistent policy to become a gateway for goods and a transit country for energy in the wider Balkans/Black Sea region.