The Greek Wire - January 2022

The Greek Wire is a monthly newsletter aiming to inform you about key economic and political developments in Greece.

Fitch upgrades Greece’s economic outlook

Fitch Ratings has revised Greece’s economic outlook from “stable” to “positive” and affirmed its rating of BB on Friday, while also raising its estimate for the country’s economic growth in 2021 to 8.3%. Greece’s rating remains two grades below investment grade. Fitch’s next scheduled report on Greece will be on July 8. The rating agency said that “we expect the recovery in economic activity to continue in 2022 and for the economy to expand by a further 4.1%, with a similar growth rate forecast for 2023.” According to Fitch the “stronger-than-expected economic growth and a reduction in the government deficit driven by a substantial reduction in pandemic-related support will support a decline in government debt as a share of GDP. The debt ratio declined at 198.4% in 2021, against 206.3% in 2020, expected to fall at 190.3% this year and to 185.3% by the end of 2023.

Automatic VAT rebates coming soon

According to the planning of the Independent Authority for Public Revenue, interested companies and freelance professionals will be able to submit their demands electronically and observe their VAT rebate due being credited to their bank account in a short period of time. This process will be followed for the majority of money return applications, including 97% of tax rebate demands. For other applications the authorities will perform inspections, and demand additional data. The new plan of the tax administration provides for corporations and professionals to be immediately notified about the payment date of their rebates via email, as long as their case is to be processed automatically, without checks. That effectively means that the digitization of tax transactions will reduce human intervention to the minimum and pave the way for express payments.

Golden Visa numbers on the rise again

“Golden Visas”, the residence permits issued to non-European Union citizens in Greece, are back on demand in 2021. There was an increase of 10.3% with the issue of 1,035 new five-year permits, from 938 of the previous year. That means that the funds placed in the Greek real estate market for that purpose are estimated at a minimum of 258.7 million euros, which highlights the maintenance of the high investment interest from abroad in acquiring a residence in Greece. The increase in permits may in fact be even greater, given that the above figure only concerns those already issued and does not include applications for permits that have not yet been processed. The latest data show that since the start of the Golden Visa program, Greece has issued a total of 9,610 permits to investors, or 28,767 permits including their family members too. Bank of Greece data showed that in the January-September 2021 period 797.2 million euros arrived in Greece for the purpose of property acquisition.

Increase of 25% of the Import price index in Industry

The Overall Import Price Index (MPI) in Industry, recorded an increase of 25.0% in November 2021 compared with November 2020. The corresponding index in November 2020 had recorded a decrease of 9.9% compared with November 2019. The Overall Index in November 2021 recorded a decrease of 2.9% compared with October 2021. The corresponding index in November 2020 had recorded an increase of 4.0% compared with October 2020.

Greek tourism expected to record 5% Growth in 2022

A recent update by the Bank of Greece has shown that the country has had a remarkable recovery in the tourism industry. According to the forecasts made by the Bank of Greece, the growth rate in the country’s economy was expected to turn out at 7.2% in 2021. This represents a significant increase compared to 2020 when the country was dealing with the COVID-19 pandemic and keeping strict restrictions in place. In 2022, it is expected a 5.0 % growth, whereas, in 2023, the growth is projected to be 3.9%, provided that there is continued support from international tourism. The Bank of Greece notes that “the main challenge for the Greek economy in the short term is to contain the pandemic more effectively, as vaccination coverage of the population falls short of the EU average, while the health impact of the pandemic is more severe by European standards”.

EU Commission approved 2022-2027 regional aid roadmap for Greece

The European Commission has approved Greece's roadmap for receiving regional aid from 1 January 2022 to 31 December 2027 within the framework of the revised Regional Aid Guidelines (‘RAG'). Greece's regional road map defines the Greek regions eligible for regional investment aid. The map also establishes the maximum aid intensities in the eligible regions. The aid intensity is the maximum amount of State aid that can be granted per beneficiary, expressed as a percentage of eligible investment costs. Under the revised RAG, regions covering 82.34% of the population of Greece will be eligible for regional investment aid.

Inflation at 11-year high - 5.1% in December

 Consumer price index jumped to 5.1% in December of 2021, compared to the corresponding month of 2020, as the cost of natural gas soared by 135.7%, according to official data from the Hellenic Statistical Authority (ELSTAT) on Thursday. The December 2020 jump follows an annual inflation rate of 4.8% in November and 3.4% in October. The cost of natural gas was followed by a 45% rise in electricity and a 34.1% rise in the price of heating oil.

Industrial production index: Y-o-Y increase of 8% in November 2021

According to the Hellenic Statistical Authority, the Overall Industrial Production Index in November 2021 recorded an increase of 8% compared with November 2020. The Overall IPI in November 2020 increased by 8.9% compared with the corresponding index in November 2019. The average Overall Industrial Production Index for the period from January to November 2021 recorded an increase of 10.0% compared with the average IPI of the period from January to November 2020. The index of other manufacturing divisions recorded the greatest percentage increase, whereas the index of machinery and equipment division showed the greatest percentage decrease in November 2021 compared with October 2021. Comparing the indices of November 2021 with the corresponding indices of November 2020, the greatest percentage increase was recorded in wearing apparel, while the highest percentage decrease was recorded in coal and lignite, extraction of crude petroleum and natural gas, mining support service activities.