Investing in Greece – 2024’s analysis

Investing in Greece 2024's analysis

Last data from the foreign direct investment

According to UNCTAD’s World Investment Report 2022, FDI flows to Greece reached 5.7 billion USD in 2021, above the pre-pandemic level of 5 billion USD recorded in 2019. In the same year, the total FDI (Foreign Direct Investment) stock stood at 45.8 billion USD. The tourism sector has paved the way for this increase in investment, with dozens of hotel and resort projects included in the government’s strategic investment program, which provides for fast-track procedures. Bank of Greece data show that the countries holding the most FDI in 2021 were Germany (18.3%), Luxembourg (17.7%), the Netherlands (16.7%) and Switzerland (8%). Europe held 87.2% of the shares. In terms of sectors, those attracting the most foreign investment were manufacturing (17.8%), information and communication (16.2%), real estate (14.4%), wholesale and retail trade (12.9%) and transport and storage (9.2%). According to the latest OECD data, FDI inflows to Greece totaled 4.8 billion USD in the first half of 2022, a sharp increase on the 1.7 billion USD recorded in the same period a year earlier.

The country’s strengths include its strategic location, excellent maritime infrastructure (being the world leader in shipping), the fact that Greece is one of the main beneficiaries of the Next Generation EU stimulus fund as it is set to receive 33 billion EUR (almost a fifth of GDP) over the next 7 years, and relatively low labor costs. In recent years, the energy sector has attracted considerable investment from Spain, France and China as Greece liberalized its electricity market and reformed its licensing procedure for renewable energies. In addition, according to Eurobank, investments valued at 32 billion EUR in infrastructure and real estate, energy and decarbonization, telecommunications and digital upgrades, tourism and manufacturing are expected to boost economic growth in Greece through to 2025. Among the country’s weak points are the poor performance of the industrial and banking sectors (grappling with the EU’s highest ratio of non-performing loans), insufficient R&D investment, bureaucratic inefficiencies, costly regulations and uncertainty over the future regulatory regime (see the list oh handicaps below). Greece does not have an investment screening mechanism; however, the government is currently working on legislation to develop an FDI screening procedure in line with EU regulation 2019/452. Greece is ranked 53rd out of 82 countries in the Economist Business Environment ranking, 42nd among the 132 economies on the Global Innovation Index 2023 and 107th out of 177 on the 2023 Index of Economic Freedom.

 

Greece’s investment disadvantages

  • The economic crisis has considerably diminished economic prospects. Consumer confidence has fallen, liquidity problems have made access to credit difficult, and consumption has been greatly impacted;
  • Very high public debt;
  • Rigid business environment with a lack of capacity to adapt to international standards.
  • Weak industrial and banking sectors;
  • Insufficient investment in research and development;
  • Bureaucratic inefficiencies, onerous regulations and uncertainty about the future regulatory regime;
  • High levels of corruption affecting many aspects of economic and business life (according to Transparency International).
  • Persistent social tensions: A public healthcare system that is deteriorating and positively costly for the taxpayer; Growing social disparities due to poverty; University privatization, Middle-class impoverishment, lack of control over inflation, long-term illegal immigration, etc.
  • Many industries tend to be oligopolistic by culture, creating difficulties for investors wishing to enter the sector. This leads to a loss of intern competitive dynamism, resulting in collusion between the various market stakeholders, and monopolistic positions with noxious consequences for end consumers.

 

The tourism industry

Until the early 2000s, agriculture was one of the mainstays of the Greek economy, but today it accounts for just 4% of Greek GDP. However, the sector continues to employ 12% of the declared working population (tobacco, cotton, olive oil, sheep farming). At national level, the most important industry is aquaculture, which is also the largest in Europe. But it is obviously tourism that remains the country’s main resource. Tourism accounts for 18% of the country’s gross domestic product (GDP). The tourism sector employs over 900,000 people.

Greece recorded a record 32.7 million foreign tourists in 2023, according to provisional figures released Wednesday by the Bank of Greece, despite a prolonged heatwave and devastating fires during the summer. Last year, the number of foreign tourist arrivals rose by 17.6% compared with 2022 and surpassed the previous record of 31.3 million in 2019, over 25% of GDP. The year of the previous record, after a summer of 2023 had been marked by fires that killed at least 26 people and led to the evacuation of thousands, including many tourists particularly on the island of Rhodes (southeast). Some criticize are reacting to the lack of competence and coordination on the part of civil protection, which has had to be assisted in times of crisis by its European neighbors and counterparts. Some others blame the scourge of mass tourism on islands first and all over Greece, leading to a deterioration of the environment such as strong pressure on natural habitat, and denounce a real estate becoming unaffordable for inhabitants.

However, micro measures are being taken at local level to fill the gap of the loss of tourism from Israel, such as fast-track visas for Turkish tourists on the islands of Kalymnos, Limnos, Leros, Kos, Lesvos, Chios, Samos, Kos, Rhodes, Symi and Kastelorizo. As well, the island of Rhodes would like this visa to be implemented as soon as possible, so that it can welcome more Turkish tourists as early as summer 2024.

To conclude, the Greek state, far from representing a social welfare state for its citizens with a social and economic long-term vision reinvesting its wealth to strengthen innovation*, prefers to concentrate and accelerate on a trend already marked by a series of decisions maintaining the tourism sector. Another well-thought-out strategy would like to see other business sectors stimulated to gain independence on the almost unique source of wealth that relies on foreign capital (individual or business). In 2023, Greece is Europe’s 4th biggest tourist destination after Italy, Spain and France, and over 1/4 of GDP is generated by tourism.

 

Greece in figures (source: Eurostat)

  • Public deficit: 0.7% (Q4 2022)
  • GDP: 208.03 billion euros (2022)
  • Inflation: 4.5% (April 2023)
  • Growth rate: 1.4% (2022)
  • Unemployment rate: 10.8% (January 2023)
  • Public debt: 171.3% (2022)
  • UN Human Development Index: 0.866 (2015)
  • Per capita wealth: 25% (2008) VS 86% (2022)

 

*Greece performs below the regional average in Europe in Knowledge and technology outputs, Creative outputs, Business sophistication, Market sophistication, Infrastructure, Institutions (Global Innovation Index 2023)

 

Emilie LE BON
Jurist in International Law & Economics
Theodorou Law Office & Associates
All reproduction prohibited

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