Despite the severe economic crisis Greece has been facing over almost a decade, the country’s performance in dragging in foreign investment throughout the years has established a rather impressive track record. So far, 2017 has definitely been a year of increased economic, commercial, and corporate activity, and of gradually improving financial circumstances.
In late October the Greek Ministry of Finance issued a bulletin on the year’s national financial and economic developments, pointing out, inter alia, that all economic indicators confirmed an upward economic outlook, portending an increase in competitiveness and commercial activity. The same report expressed the optimistic view that foreign direct investments (FDI) are expected to surpass EUR 4 billion in total by the end of the year, “based on the seven-month period performance and the overall performance of FDI in previous years,” with GDP growth drifting towards the annual target of 1.8%.
The rebound in foreign direct investment is welcome news for Greece, which is struggling to boost growth and fend off investor fears of market volatility and financial insecurity. The completion of the latest EU program review in early December certified a buoyed business confidence index, a slightly increased manufacturing purchasing managers index compared to the previous trimester, and a steadily increasing private productive investments rate. At the same time, the feeling that it is about time for the EU to leave the Greek crisis saga behind pervades both EU governments and Greece, which wishes to keep providing the Eurozone with comfort as regards its economic future.
The most recent data available from the Bank of Greece shows that Greece continues to receive most of its FDI flows from other EU member states (including all of its top five sources: Germany, Luxembourg, the Netherlands, France, and Switzerland). The USA and Canada are also among the top ten source countries of foreign investment in Greece during the last decade, significantly increasing their investment presence over the last few years.
In terms of the main investment sectors, records show that foreign investors feel safer investing in areas such as real estate, manufacturing, trade, information and telecommunications, banking/finance, and energy/oil and gas.
Despite ongoing economic uncertainty throughout the years, Greece has, surprisingly, managed to maintain a satisfactory position on the FDI map – with the exception of last year, which saw only a few foreign investment deals in the country. Greece’s talent to drag in foreign investors even in the direst times is mainly due to a series of traits providing Greece a competitive advantage compared to the remaining Euromed region.
Greece is a highly strategically-positioned country, geographically positioned at the crossroads of Europe, Asia, and Africa. As a member of the EU and the Eurozone, Greece provides investors with access to high-growth and emerging regional markets, and it is highly competitive in terms of trade, infrastructure, and human resources. In addition, Greece provides foreign investors with three highly attractive sectors: commercial real estate, shipping, and tourism, as long-term projections indicate strong prospects for tourism, multiple opportunities related to upgrading or updating infrastructure, and a renewed interest in commercial real estate, mostly related to yield investments, especially in quality real estate with prime tenants. On the same note, Greek shipping is one of the strongest sectors in the world and comes right after tourism in terms of economic contribution, generating high demand for maritime transportation products and services.
Having ensured that FDI inward flow is on a steady track, the Greek government is planning to implement a series of measures in order to motivate and launch foreign productive investments in Greece. To this end, the Greek Ministry of Economy has announced that negotiations are underway with respect to the EU funding of the Infrastructure Fund, which will be managed by the EIB and will focus on promoting PPPs in order to tackle a lack of liquidity and provide the necessary mentoring/coaching to create a healthy environment for boosting entrepreneurship. It remains to be seen whether this proposed approach and these protection schemes and investment mechanisms will succeed in attracting long term FDI and completely restore the trust of foreigners wanting to invest their money in Greece.
By Panagiotis Drakopoulos, Senior Partner, and Mariliza Kyparissi, Senior Associate, Drakopoulos
This Article was originally published in Issue 4.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.