A Growth Strategy for the Future. Pillars of Greece s Economic Recovery

Transcription

1 A Growth Strategy for the Future Pillars of Greece s Economic Recovery

2 Ensuring fiscal sustainability In 2016, the government overachieved its programme target of 0.5% primary surplus, with an outturn of 3.8%. Greece continued its efforts to reach a positive general government balance at 0.5% of GDP. This fiscal performance had huge positive macroeconomic effects and lowered uncertainty, bringing back confidence on the country s potential to keep primary budget surpluses sustainable on the medium-term. The government s primary balance improvement has exceeded all expectations in 2016 and The programme primary balance was of 3.8% of GDP in 2016, outperforming the target by 3.3% of GDP. In 2017, it was of 4.2% against a target of 1.75% of GDP. The current account is now balanced. Greece implemented a medium term fiscal strategy (MTFS) to enhance public fiscal management efficiency in preparation for post-programme. The major step of such a strategy is the adoption of a new single Chart of Accounts, to be implemented commonly for all general government entities to ensure transparency of fiscal reports and financial statements.. Fostering sustainable growth Creating more and better jobs The government will place human capital at the heart of the sustainable growth strategy for the purposes of offering more, better and well-paid jobs for its population. The new level of the minimum wage, will be determined through the recently improved system following impact assessment. To this end, the government is committed to increase investments and undertake structural reforms in favor of inclusiveness and social cohesion. Priorities include : fighting against unemployment, eliminating undeclared work, promoting effective social dialogue, protecting the unemployed while ensuring a well-functioning and sustainable social insurance system.. Enhancing productivity The government continuous its reform agenda on the restructuring of its economy, as there is a need for an investment boom, especially in priority sectors. Past investments (mainly housing construction and non-tradable sectors) will shift towards new highly promising sectors: Transport and logistics, energy, agri-food, manufacturing, shipping, pharmaceutical sector, health and environment, tourism and culture. Boosting start-ups and SMEs The new Research and Innovation framework already introduced in Greece, encompasses three major policy areas : Maintaining and building capacity Supporting innovative entrepreneurship Launching flag initiatives Implementation of the Hellenic Foundation for Research and Innovation Support cooperative research projects Create incentives for private investments in R&D Set horizontal research actions in emerging research domains with social dimension. Three initiatives have been implemented so far. Improving the business environment The government set a National Plan for Exports to reach ambitious goals. The aim is for exports to be 50% of GDP by 2025) and is already seeing some real successes with growth of exports of goods and services up to 33% of GDP in 2017 (from 19% in 2009). Building a modern state In 2017 The Greek Government introduced a National Strategy for Public Administration Reform - a range of measures to be implemented from 2017 to 2019 (i.e local government, regulatory governance, human resources management, e-government strategy..). The Government also introduced reforms of the legal-judicial system important for economic activities. There is significant priority given to the depoliticization of Greek business including such elements as the appointment of high level managers in both the business and public sectors. Ensuring the Greek business environment is simplified and made less bureaucratic is also central. It also includes series of reforms to foster a dynamic business environment: creation of a digital one-stop-shop and a proper framework for the establishment and licensing of business to ease business creation and functioning,

3 create jobs and facilitate investments. Greece is working on creating an attractive business environment through encouragement and simplification. Taxation policy Objectives will be attracting productive investments in export-oriented sectors and enhancing productivity, through a gradual reduction of the tax wedge to both firms and labour and through the establishment of a steady taxation regime, to foster foreign and local investments. The tax reform strategy includes the following objectives : Enhance tax compliance ; Fight tax evasion and smuggling ; Facilitate business and commerce ; Promote an outward-looking, efficient administration, with respect for the citizen ; Protect the social community. Structural conditions for growth Greece is looking to take advantage of its enviable geographical location at the fulcrum of the East-West-North- South by strategic investments in our connectivity through rapid improvement of the country s transport, energy, digital infrastructures and networks. Therefore, the Greek government decided to undertake an ambitious work to upgrade resilience, accessibility and sustainability of the infrastructures. To this end, Greece launched a National Strategic Transport Plan in May 2017 in order to develop an integrated trans-european network, interoperable and environmentally-friendly. Also, energy infrastructures will experience a significant restructuring. The government took huge steps in this way, initiating a National Energy and Climate Plan until 2030, to be completed in 2019, in order to tackle environmental priorities and targets defined by European Union Energy policies. The country is finally rolling out a comprehensive, inclusive National Digital Strategy that will transform Greece into a modern, forward facing economy. Such a strategy will embrace the private sector needs to restore and maintain their competitiveness.. Fair & inclusive growth As one of the major parts of this overall strategy, the Greek government is implementing policies fostering environmental, cooperative and social values. It aims at promoting a socially-oriented economy, guaranteeing regional development and cohesion, and ensuring inclusive education. This inclusive growth strategy will reinforce national cohesion and reduce inequality. The government is building on the strengthening of Greece s human capital by developing a Knowledge Economy, with particular focus on R&D and transforming the education system to support the most dynamic sectors of Greek economy. Thus, Greece is creating an environment that is fit for the country s highly educated young population. Financing growth Since 2015, Greece has modernized the legal framework for strategic investments, creating a fast-track to accelerate large scale investments and passing new Investment and Development Laws to encourage private investment. The Development Law passed in 2016 is designed by the government to generate more than 11 billion in private investment by 2023 while boosting job creation, human resources mobilization and production of high added value products and services. In accordance to such objectives, the government created a Development Bank to promote long- term investments and facilitate access to finance for SMEs and start-ups, cooperative and social entreprises, but also public entities. The government introduced a new Public Investment Programme (PIP) as the main fun supporting the National Growth Strategy, with priority given to infrastructure projects in transport, supply chain, energy, environment, civil protection, culture and tourism. In parallel, the government implemented a range of additional programme and new mixed public/private financing tools for SMEs, entrepreneurs (developing micro finance institutions), and other economic and social groups. The Greek banking sector went through a deep structural redesigning which is still ongoing and set as a priority for the upcoming years. Far stronger and more transparent bank governance procedures are now in place. Bank stress tests earlier in May showed there was no immediate need for a capital increase by any bank and the banks were out of immediate danger, although there is an accepted need to raise capital soon..

4 Greece has made remarkable advances along the road to reform, achieving goals that many did not think possible. The Greek government is focused on maintaining the momentum of those reforms to ensure a comprehensive framework for inclusive and sustainable growth. Greece s landmark holistic growth plan builds on the achievements since 2015, allowing the country a successful exit from the era of adjustment. These reforms will continue. The effective implementation of the growth plan is underpinned by key performance indicators and ongoing rigorous monitoring. Having successfully addressed the reality of its past, now is the time for Greece to focus on a forward looking, actionable plan that can leverage all country potential. The job of reform is by no means complete but the country has reached a positive tipping point and the focus is now on developing a sound and sustainable financial and social future.. LOOKING TO THE FUTURE: GREECE AT A TURNING POINT There has never been a better time to invest in Greece. A highly educated population and competitive workforce combines with an increasingly business friendly and legislatively secure environment that encourages long term investment and the commitment of human capital. Greece s geographical position at the southern tip of Europe gives it unique access to at least 800 million people from Africa, to Europe and the Middle East. No other European nation gives this kind of access. Continuing and increasing investment in networking industries and infrastructure, logistics and innovative information and communication technologies will contribute to make the Greek economy more competitive, improve productivity and better realize the potential of those markets. The difficulties of the past have made the Greeks resilient and more determined than ever to build a modern and strong Greece. This plan sets the framework, defines the focus and the means to open up new opportunities for a renewed intergenerational engagement of the Greek people to share the ownership of such transformation and make it happen.. PROJECTIONS OF THE MACROECONOMIC SCENARIO Real GDP growth 2.3 % 2.5 % % Investments % yoy % yoy % yoy Private consumption % % yoy %

5 I. ATTRACTIVENESS FOR INVESTORS & THE FINANCING OF ECONOMIC RECOVERY Attracting Foreign Direct Investment Improving the business environment for FDI is key and Greece is taking decisive action, reviewing the legal system for strategic investments - notably by introducing a fast-track framework. It has passed a new Investment Law to facilitate and accelerate the development of large scale investments in Greece. Development Law Domestic Achievements A new Development Law was passed in 2016 that aims to generate more than EUR 11 billion in private investment in Greece by 2023 by providing incentives to the private sector. It includes: Tax exemptions for machinery and equipment Tax exemptions and subsidies to encourage entrepreneurship Tax exemptions and subsidies for new or innovative SMEs, as well as for clusters and integrated regional or sectoral projects Public funding for intermediary funding organizations A fast-track procedure, fixed corporate income tax rate and large tax exemptions for major investments Investment Programme & Structural Domestic Funds Greece has designed a complete funding programme to cover all sectors and actors for which public and private investment are key to ensure their proper development and beneficial impact on the economy. The main funding tool to support the National Growth Strategy is the Public Investment Programme (PIP). It is mainly made up of national public funds and the resources of the European Structural Funds and financial institutions (EFSI, EBRD, EIB). It stands as one of the main pillars for the financing of the country s developmental plan. The PIP was designed to drive the mobilization of other financial resources, particularly in the private and banking sectors. National PIP already finances small and medium-sized infrastructure projects across the country, with priorities in transport, supply chain, energy, environment, civil protection, culture and tourism. Help is available for SMEs, start-ups and cooperative and social enterprises. That help includes mixed-funding programmes for the development of microfinance which enable the gathering of sufficient funds for entrepreneurs and small businesses. Microfinance Institutions will be set to provide loans up to Euros 25,000 to SMEs, social enterprises and other targeted groups. Implementation of the PIP Facilitating reduction of NPLs Set the HDB 2018 Q1 Q2 Q3 Q4 Modernisation Improving of the PIP reduction of NPLs 2019 Q1 Q2 Q3 Q4 Revitalising the Banking Sector Greece s banks have passed far reaching ECB stress tests. Governance is already stronger and will improve further. Greek banks non-performing loans are being reduced in accordance with a strict timetable. It is already producing results. The goal is to boost liquidity, strengthen the financial sector and address funding gaps in the real economy, especially for SMEs, infrastructure and exports :

6 As a result, the composition of banks boards has changed radically, with the replacement of 76% of non-executive directors in 2016/2017. Relaxing and eliminating capital controls: banks have also succeeded in bringing international experience to their boards. Simultaneously, HFSF governance has improved as an independent selection panel now evaluates its members every year. Additional action will be taken to improve risk culture, compliance and internal control, in order to promote best practices and standards in corporate governance and Board performance. Greece is strengthening and diversifying the banking sector. Particular emphasis will be put on the development of cooperative banks that operate at a regional level and contribute to the real economy by financing small and medium-sized enterprises, as well as designing and providing investment solutions to meet increasing and complex local business needs. They are key to local economic development. Reducing nonperforming loans (NPLs): these policies will allow to drastically reduce the stock of NPLs to support the activities of viable businesses. It will also help safeguard social justice and cohesion by protecting vulnerable households. Greece is actively tackling the issue through a series of policies that include: - Facilitating debt resolution of viable enterprises,which affects private and public creditors - Amending the Code of Civil Procedure (CCP) to improve the enforcement of secured creditors rights, including through electronic auctions - Issuing primary and secondary legislation to address the liability of banks and official sector s restructuring personnel. Improving bank governance: for two years the Hellenic Stability Fund has been actively evaluating governance arrangements of systemic banks. The creation of the Hellenic Development Bank (HDB will expand access to finance, especially for SMEs and to support long term investments. The HDB will coordinate all the available financing instruments; it will work alongside commercial banks to bring best practices from international organisations and will secure additional funding for large investment projects and entreprises. The HDB will facilitate access to finance for: - Small and medium-sized entreprises and business start-ups - Cooperative and social entreprises - Agencies, corporations, special purpose vehicles and other entities under public law II. MODERNIZATION OF THE STATE ADMINISTRATION The Greek state administration must become more transparent, efficient and fair. It must continue to undergo significant structural public finance management reforms. This underpins the whole growth plan strategy. Greece established a medium-term fiscal strategy with a time horizon of four years to better plan and monitor fiscal data transparency and reliability. National fiscal institutions are in charge of: - Improvement in fiscal reporting - Strengthening budget execution mechanisms - Enhancing the role of the Parliamentary Budget Office and the Hellenic Fiscal Council - Continuing spending reviews - Improving cash management frameworks and payment procedures - Eliminating arrears - Adopting modern accountancy methods - Introducing performance budgeting - Improving the management of state guarantees Non-performing exposures Non-performing loans JUNE 2017 JUNE B 64.6 B 72.8 B 38.6 bn % - 47 % The NPL reduction targets above - submitted to the ECB-SSM - will remain under close monitoring

7 KEY SECTORS Health and environment, tourism and culture. The path to growth will target those sectors, with sharp focus on export potential. Digital technologies and major investments in IT infrastructure, together with the country s skilled workforce, will raise the potential of these priority sectors. Transport Infrastructures & Logistics The National Strategic Transport Plan is the backbone of national policy. It seeks to develop and upgrade road and rail networks and integrate them into trans-european ones, promote combined transport modes, improve transport safety, develop environmentally-friendly transport, develop a coherent, interoperable and high-quality rail network and support regional mobility. The National Action Plan for Logistics supports the country s goal to become a leading logistics hub for " Digital The future of Greece is digital. Investing in a comprehensive national digital strategy is crucial for Greece s economic transformation and will lead to tremendous productivity gains, greatly improve of the quality of life of Greek citizens and the quality of public services. It will also promote cohesion between Greece s many regions and islands. III. A CLEAR PATH TO GROWTH: May 2017 To be completed by 2020 PRIORITIES OF THE GOVERNMENT INCLUDE: Ensuring inclusive access to digital infrastructure Accelerating the transition to high-speed internet Providing adequate legal frameworks Building a modern e-government and helping economic sectors and SMEs take advantage of productivity-enhancing digital tools what is often an underserved region by increasing transit and developing value-added services. Sea transport initiatives are also key to enhancing shipping efficiency and maritime operations, contributing to Greece s territorial cohesion and upgrading communication between Greek islands and the mainland. The strategy is also about developing environmentally-friendly transport such as low carbon transport systems with a view to promoting sustainable regional mobility. Examples include the development of Line 4 of the Athens metro station. Developing the Greek Logistics sector is of central importance as it constitutes a major development tool. The overarching objective is to provide effective, reliable, fully integrated and sustainable logistics services, which meet the needs of customers by improving levels of service at a competitive cost. launching of the national strategic transport plan national action plan for logistics objective : become a leading logistics hub at the European Digital transformation will require significant investment. Greece will take advantage of the digital revolution particularly to expand the scope of its e-governance strategy, help the private sector to gain competitiveness and leap several developmental steps straight into the digital future. The Greek digital taskforce will be looking to the future through global best practice. Greece s Super-Fast Broadband action plan has a budget of Euro 700 million. Its aim is to achieve high-speed internet, of at least 100Mbps, with direct upgrade to 1Gbps, for households and businesses across the country. It will be funded from both the European National Programme for Rural Development and the Rural Development Programme of the National Strategic Reference

8 Framework. National funding from Greece will come from the Public Investment Programme. 5G mobile will be rolled out in Greece in line with the European 5G Roadmap. The pilot programme will be first implemented in the cities of Trikala and Patra. In March 2018, Deutsche Telekom and announced plans to invest Euro 2 billion over the next four years in the Greece for the development of fibreto-the-home and 5G, to ensure at least one million households will acquire 1 Gigabit speed connection. Energy Greece can significantly expand its domestic energy market development and lower energy costs. The national strategy covers a wide scope with its bold energy vision: Improvement of energy efficiency Interconnecting islands with the Mainland Q1 Q2 Q3 It also include new renewable energy support scheme and a domestic electricity market restructuring. There is a significant international dimension to infrastructure and network development. Greece occupies an enviable strategic position in the region, and its role will be key in fostering co- development with the Balkan countries. Greece is seeking an enhanced regional cooperation in various sectors including security, migration, environment and climate change, transport networks, natural resources efficiency, health, as well as energy security and supply. Energy interconnection is key for Greece and the government is willing to intensify regional developments in this sector to turn Greece into an energy transit hub, but also an energy producer Elaboration of the National Energy & Climate Plan (until 2030) I V. INCLUSIVE GROWTH - SUSTAINABLE RECOVERY Regional & National Cohesion A prime objective of the growth strategy is to reinforce Greece s national cohesion and reduce regional inequalities to ensure the strategy s regional dimension. To this end, the Government is completing 13 Regional Conferences on Production Reconstruction, the conclusions of which will be integrated into natal policy-making on various sectors. Focus will include transport networks to improve accessibility of islands; enhanced mainland transports networks; smart water and waste management; digital services; farming and fisheries. Education Reform & the Knowledge Economy The reform of the educational system is a pillar of the growth strategy, serving the new growth model, while fostering a reduction in social inequalities. The main objectives are the modernization of educational structures, the improvement of the educational outcomes and the integration of graduates into the labour market. Notable reforms include the introduction of two years of pre-primary schooling and the restructuring of upper-secondary education and access to higher education. Greece is building the foundation for a knowledge economy. To achieve this, the government will set up a research and innovation framework, involving specialized institutions, such as the Hellenic Foundation for Research and Innovation, in order to foster the quality and size of R&D investments. Socially-oriented Economy Greece is implementing policies aimed at fostering the development of productive yet sustainable initiatives, based on social and cooperative economic values. A new legal framework adopted in 2016 and a specific action plan for the development of a social, cohesive and equitable economy are already under implementation to leverage unexploited potential.

9 Green Economy These include the National Action Plan on Circular Economy, waste management and recycling and energy commitments to green the economy across multiple sectors. Health Care & Social Protection Greece is committed to equal and universal health coverage, and it recently ensured access for the substantial uninsured population to the Public Health System. Along with this objective, the government will also strengthen and upgrade social protection. The full implementation of a modern, sustainable and fair protection and pension reform is central to this strategy. Youth Initiatives Greece must tackle the brain drain of its young talent. The Youth strategy seeks to promote youth autonomy and independence and facilitate their transition to adulthood; provide a fair and qualitative education-training-apprenticeships; ensure decent work for young people; and MAIN LINES OF THE STRATEGIC PLAN OF EKAPI (NATIONAL CENTRAL AUTHORITY FOR HEALTH PROCUREMENTS) FOR THE NEXT 3 YEARS: - Centralization of procurements and services used in the public health system - Improving tendering procedures, organizational and administrative framework of procurement, introduction of common standards - Upgrading communication with international organizations and relevant networks encourage youth entrepreneurship. It must enhance youth health and wellbeing; participation in decision-making and reduce inequalities among young people and create youth-friendly cities. Post-programme Preparation Domestic and foreign investors need a clear roadmap concerning the post-programme period. Foreign direct investors, domestic investors and the Greek diaspora alike need to know that there is a stable future in Greece. The European Institutions have agreed to a series of debt relief measures towards Greece. The short term measures have been completed by end 2017 leading to a reduction of debt to GDP ratio of around 25 percentage points of GDP by 2060 and 6 percentage points pf Gross Financing Needs. Medium-term measures are expected to be implemented at the end of the programme, although size and scope still has to be determined. In the long- term, a debt crisis response mechanism is being designed to ensure debt sustainability which could lead to further debt relief measures such as smoothing EFSF loan maturities. The Eurogroup decisions of June 2017 mention the willingness to ensure Greece s ongoing market access. This will in part be done through the constitution of a cash buffer, as was the case with the other countries which completed adjustment programmes. The creation of cash reserves will be achieved through both ESM disbursements and new bond issues, such as recent issues of the 5-year bond issue in August 2017 and the 7-year bond issue in February 2018.