Country risk reference rating: Level 5 (5/9)
Country Risk Outlook: Stable
◆Political Risk
In order to get out of the debt crisis as soon as possible, the Greek government has pushed for austerity policies that have triggered and intensified social conflicts. Domestic violence has intensified and the risk of ethnic conflicts has increased. As the debt crisis continues, Greece’s social pain will continue for some time.
Greece has no restrictions on profit transfer. After joining the Eurozone, the Greek foreign exchange market operated under EU rules on free movement of capital and there were no controls on foreign exchange. At the same time, Greece is also a signatory to the bilateral investment agreement and is open to external investment. However, its current financial and economic conditions and the risk of launching the Eurozone have a certain impact on external investors.
◆Economic Risk
Greece has seen an economic recovery since it implemented a series of austerity and reform measures in exchange for bailout loans. Economic reforms will continue in the future, but deflation, high unemployment and low investment still plague Greece, and paying off debt is an extremely arduous task. Therefore, although the economy will bottom out in the short term, it is expected to remain weak in the longer term.
The double blow of the financial crisis and sovereign debt plunged the Greek economy into a six-year recession since 2008. In 2013, the economic growth rate dropped to approximately -3.7%, a decrease that declined. Domestic demand has declined, investment has shrunk, and export growth has declined. Economic recession and commodity market reforms pushed Greece into deflation. Recently, the Greek economic situation has improved, and consumer confidence and business confidence have stabilized and rebounded. In May 2014, the Greek Prime Minister proposed an economic growth plan called “Greece 2021”, whose goals include achieving 50 billion euros in fiscal revenue and creating 770,000 jobs in the next seven years. Therefore, it is expected that the Greek economy will rebound in 2014 and may enter a recovery cycle in 2015.
◆Business environment
In January 2013, the Greek Parliament passed a tax measure amendment bill, including raising corporate income tax and personal income tax, which is expected to increase fiscal revenue by 2.3 billion euros in the next two years. Greece belongs to the Eurozone and its foreign exchange market operations comply with EU regulations. In Greece, it is relatively convenient to exchange currency. Foreign currencies such as US dollars and pounds can be freely exchanged at local banks or exchange offices. There are currency exchange offices in various cities, banks and tourist attractions. Greece’s foreign exchange management policy is relatively loose. Foreign-funded enterprises can open foreign exchange accounts locally and remit funds freely, and no taxes are payable on profit remittances.
Affected by the economic downturn and debt crisis, the amount of foreign direct investment attracted by Greece fell to the bottom in 2010, and then showed a slight recovery. In order to repay debts, the Greek government is carrying out large-scale privatization reforms of state-owned assets, with investment areas including infrastructure, real estate, electricity, airports and tourism. Historically, Greece has a superior geographical location and comparative advantages in tourism, energy, logistics, etc. In 2014, the Greek economy is expected to achieve positive growth and a fiscal surplus, which will play a positive role in attracting and retaining foreign direct investment.
The Greek government actively encourages investment and has formulated and promulgated many investment incentives. Greece is a member state of the European Union. Foreign direct investment complies with the unified standards of the European Union and can obtain preferential policies such as investment subsidies, rental subsidies, wage subsidies, and tax exemptions depending on the investment region and investment industry. For years, foreign companies were excluded from the Greek public sector, but that is changing. In 2014, on the basis of the gradual improvement of Greece’s economic situation, the business environment will improve.
◆Policy suggestions
Currently, the Greek government is putting many structural reforms on the agenda, such as industrial structure, labor system, welfare system and state-owned asset privatization reform. These reforms are very critical for Greece to adjust its economic institutions, stimulate corporate vitality and ultimately enhance competitiveness. , but due to many obstacles, the road to reform is not smooth, and the effect of the policy remains to be seen.
Greece has passed through difficult times, but debt repayment is still unsustainable. Once the Greek economy relapses or the austerity policy is poorly implemented, the debt crisis is at risk of returning, so we should pay close attention to developments.
Greece has taken a series of measures to create a good business environment, such as simplifying the procedures for starting a business to encourage investment, but whether Greece will introduce more stringent measures to reduce bureaucracy and corruption deserves attention.