Executive Summary.. 5
Core Views...5
Major Forecast Changes.....5
Key Risks To Outlook.....5
Chapter 1:Political Outlook.. 7
SWOT Analysis... 7
BMI Political Risk Ratings..... 7
Domestic Politics... 8
Unity Government: The Eye Of The Storm...8
In a bid to suppress the political crisis and restore some semblance of faith in Greeces commitment to fiscal reforms and the euro,
Athens has installed a national unity government, allying the opposition New Democracy party with the ruling PASO K administration.
While this may provide some relief in the near term, the prospect of fresh elections in early 2012 indicate further instability and
uncertainty ahead.
TABLE: Political Overview.. 8
Chapter 2: Economic Outlook.... 11
SWOT Analysis..... 11
BMI Economic Risk Ratings.... 11
Economic Activity ... 12
Caught In The Throes Of Capital Flight And Asset Hoarding...12
Greeces economic depression is likely to have deepened in Q411 and potentially in Q112 on the back of an outright collapse in
confidence and heightened uncertainty over the beleaguered economys future in the eurozone. While we expect the pace of contraction
to ease in 2012, we stress that a return to sustainable growth is predicated not just on successful economic reforms but also on
targeting policies at future growth industries and restoring confidence.
TABLE: GREECE – ECONOMIC ACTIVITY... 12
Monetary Policy ... 13
Deflation Awaits....13
Greek consumer price inflation continues to trend down, and is close to sliding into deflationary territory. Despite a return to monetary
easing from the European Central Bank, the scale of demand destruction in Greece will prove overwhelming. Though we believe the
risks to our outlook are tilted somewhat to the upside – such as the threat of a fresh rally in commodity prices, new consumption taxes or
even departure from the eurozone – our core view expects a protracted period of falling prices, repeating the Irish example.
TABLE: INFLATION .... 13
Balance Of Payments.. 15
Service Exports Slowing C/A Adjustment..15
Greeces current account remains deep in the red despite the destruction in domestic demand amid the economic depression. The
speed of adjustment is being moderated by still positive growth of imported goods (in part due to a lack of import substitution in some
cases as well as to higher global commodity prices) and anaemic growth in service exports. While we expect the current account deficit
to continue to narrow, we warn that capital flight could ultimately force a much more disorderly rebalancing.
TABLE: CURRENT ACCOUNT ... 15
Economic Activity II .... 17
Looking Ahead To 2021....17
Despite entering the fourth year of recession, there is some light at the end of the tunnel for the Greek economy. We expect positive
growth to return by 2013, while still cautioning that the outlook through the remainder of the decade will be far from radiant. Major
challenges ahead include the growing wealth disparity between Greece and the eurozone core, higher external borrowing costs, a
fractured labour market and potential abandonment of the euro.
Banking Sector .... 18
Domestic Demand Shrinking...18
The Greek banking sector continues to suffer from a contraction in domestic demand and deposit flight, fuelled by uncertainty over
Greeces membership of the eurozone. Without a restoration of confidence and a plan to revive the economy, the banking sector will
continue to teeter on the precipice.
Chapter 3: 10-Year Forecast.. 21
The Greek Economy To 2021.. 21
Lower Growth Path To Emerge Over The Long Term....21
With international credit conditions unlikely to return to pre-2008 levels in the foreseeable future, we expect both consumer and
investment spending to be more subdued over the longer term, anchoring the Greek economy on to a lower growth path than that
seen leading up to the global credit crisis. Although Greece will continue to post real convergence gains with the EU , we stress that a
significant degree of integration has already occurred, with income per capita settling at a level similar to that of Spain. Moreover, we
believe that broad political and economic stability will remain in place, which will continue to accentuate Greeces attractive investment
climate going forward.
TABLE: LONG-TERM MACROECONOMIC FORECASTS .... 21
Chapter 4: Business Environment. 23
SWOT Analysis..... 23
BMI Business Environment Risk Ratings.. 23
Business Environment Outlook.. 24
Introduction ..24
Institutions ....24
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS... 24
Infrastructure ....25
TABLE: BMI LEGAL FRAMEWORK RATING... 25
TABLE: LABOUR FORCE QUA LIT Y..... 26
Market Orientation ....27
TABLE: TRADE AND INVESTMENT RATINGS..... 27
Operational Risk....28
Chapter 5: Key Sectors... 29
Oil & Gas .. 29
Executive Summary..29
Market Overview....29
Industry Forecast..30
TABLE: Oil And Gas – Historical Data And Forecasts, 2010-2013.. 31
Infrastructure ... 32
Executive Summary..32
Market Overview....32
Industry Forecast..... 34
TABLE: Greece Construction And Infrastructure Industry Data, 2008-2015. 35
Other Key Sectors.... 37
TABLE: Autos Sector Key Indicators... 37
TABLE: Food and Drink Sector Key Indicators... 37
TABLE: Pharma Sector Key Indicators... 38
TABLE: Telecoms Sector Key Indicators.. 38
TABLE: Defence and Security Sector Key Indicators. 39
TABLE: Freight Key Indicators.... 39
Chapter 6: BMI Global Assumptions. 41
Global Outlook.. 41
Eurozone Break-Up Risks Rising ...41
TABLE: GLOBAL ASSUMPTIONS ..... 41
TABLE: DEVELOPE D STATES REAL GDP GROWTH FORECAST .... 42
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS .... 42
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST ... 43