2013-10-25 17:37:56 - New Country Reports market report from Business Monitor International: "Greece Business Forecast Report Q4 2013"
We expect a return to positive economic growth in 2014 following six years of depression.
The prospect of further spending cuts and tax hikes will ensure that demonstrations and national strikes remain a key feature of the political landscape over the medium term.
The current account deficit has collapsed faster than we had expected, raising the prospect of a return to surplus over the medium term.
This is symbolic of Greece's transition towards a more balanced and sustainable economic growth model.
Major Forecast Changes
There are no major forecast changes this quarter.
Key Risk To Outlook
Upside Risks To Deficit Forecasts: The severity of the fiscal consolidation programme and the public backlash mean that the scope for slippage will remain pronounced.
To Economic Growth Forecasts: Should Greece decide to leave the eurozone, the recession would deepen in the short-to-medium term as the banking system would implode and the cost of energy and food imports would rocket.
Full Report Details at
- www.fastmr.com/prod/694756_greece_business_forecast_report_q4_20 ..
Partial Table of Contents:
Major Forecast Changes
Key Risk To Outlook
Chapter 1: Political Outlook
BMI Political Risk Ratings
Bailout Number Three On The Horizon
- The Greek government will likely seek to negotiate a third financial bailout once the current programme expires in 2014. Although this may be relatively straightforward to secure, especially given the progress made thus far on structural reforms and the recent emergence of a primary fiscal deficit, convincing Greece's creditors to allow further debt restructuring in the future will meet with stiff resistance. We still believe that further writedowns will be necessary, but stress that the economic and financial market fallout will be more limited than in 2012.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
A Decade Of Austerity And Instability
- Greece's political landscape is likely to become more tumultuous in the coming years. The legacy of fiscal profligacy and economic distortions will leave an indelible mark on the Greek economy and society, with political voices potentially becoming more fragmented. We therefore expect a prolonged bout of austerity and instability in the decade ahead.
Chapter 2: Economic Outlook
BMI Economic Risk Ratings
Economy On The Mend, But Labour Market Still Impaired
- Greek national account data and evidence from confidence surveys strengthen the argument that there are finally green shoots of recovery. For the time being, this has yet to be fully reflected in leading indicator data, although we expect to see an improvement on this front in the coming quarters. We maintain our projection for a return to positive economic growth in 2014, though continue to caution that without a marked and sustainable recovery in exports and investment, the growth profile will remain subdued.
TABLE: ECONOMIC ACTIVITY
Balance Of Payments
Current Account Getting Closer To Surplus
- Trade rebalancing in Greece has happened so quickly in recent quarters that a 12-month current account surplus could be on the cards for end-2013 or early 2014. However, we continue to argue that this rebalancing is suboptimal as it reflects demand-driven import contraction, rather than a significant improvement in export competitiveness. This suggests that external debt can be stabilised, but that longer-term growth will suffer.
TABLE: CURRENT ACCOUNT
Consumer Price Deflation Underway
- Greek consumer prices are now firmly in deflationary territory, confirming our long-held view that inflation would follow the path set by Ireland where deep fiscal austerity smothered demand side price pressures. We expect this dynamic to continue playing out in 2014, but believe that the rate of deflation will be fairly modest given that the worst of the economic downturn has already passed.
TABLE: MONETARY POLICY
The Options On The Table: Shotgun Default Or Long-Term Quarantine
- In light of growing speculation that Greece will need further financial support after the current bailout programme expires in 2014, we reiterate our view that additional debt restructuring will be required in the coming years. To nuance our argument further, we use a Monte Carlo-type framework to run a series of simulations for the sovereign debt trajectory to get a sense of the possible debt distributions by 2020.
Banking Sector: Consolidation Phase
- We expect financial pressures for Greek banks to continue subsiding as the domestic economy stabilises and shifts gradually further along the road to recovery. However, the industry will still face significant challenges in terms of deleveraging and attracting deposits, with the longer term growth trajectory consequently subdued.
Chapter 3: 10-Year Forecast
The Greek Economy to 2022
Lower Growth Path To Emerge Over The Long Term
Full Table of Contents is available at:
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