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Greece Country Risk Report Q4 2017

Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Short-Term Positives But Headwinds Persist
Signs of short-term improvements in both sentiment indicators and 'hard' economic data support our view that economic growth in
Greece will accelerate in 2017 and 2018. However, we remain below consensus with our forecasts, given the tentative nature of the
recovery, persistent headwinds and potential flashpoints on the horizon.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Tourists And Foreign Direct Investors Warming To Greece
Greece will record small current account deficits in 2017 and 2018, owing to a persistently large trade deficit and structural impediments
to stronger export growth. Nevertheless, a booming tourism sector and rising foreign direct investment inflows are bright spots in
Greece's balance of payments outlook.
Outlook On External Position
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: TOP FIVE GOODS EXPORTS
TABLE: TOP FIVE GOODS IMPORTS
Monetary Policy
Improving Growth To Bring ECB Closer To A Gradual Exit
Economic and financial conditions in the eurozone have normalised over the past two-and-a-half years since the European Central
Bank (ECB) announced the launch of its expanded asset purchase programme (APP) in January 2015, and now it is clear that monetary
policy has hit an inflexion point. The withdrawal of monetary accommodation, however, is set to be gradual and cautious.
Fiscal Policy And Public Debt Outlook
Difficult Path To Self-Financing
While we now expect Greece to meet its primary budget target in 2017, we remain sceptical that the future path set out by the
Eurogroup as part of its bailout programme is achievable. We see Greece missing its 2018 primary budget target and continuing to
struggle to meet targets over the medium term, keeping the risk of a fourth bailout being needed elevated.
Structural Fiscal Position
Debt Burden To Remain Substantial
Although Greece's budget deficit is set to diminish in the years ahead, the country will remain dependent on bailout funds and debt relief
measures from its creditors if it is to make any dent in its massive debt burden of 180% of GDP.
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
EUR: Near-Term Top Is In, But Parity No Longer In Play
The euro has reached a top against the US dollar in 2017, with technicals and positioning both pointing to a near-term reversal. The
euro will continue to weaken in 2018 as eurozone growth cools somewhat and expectations for ECB tightening are tempered, while the
Fed presses ahead with interest rate hikes. Over the longer term, eurozone reform momentum and ECB policy normalisation, including
the potential for a much more hawkish ECB president in 2019, will drive a modest rebound.
TABLE: BMI EUROZONE CURRENCY FORECAST
Contents
Chapter 2: 10-Year Forecast
The Greek Economy To 2026
Another Lost Decade Ahead
Greece's economy will remain along a painfully sluggish growth trajectory over the next decade. An unsustainable debt load, harsh
fiscal austerity conditions, and dire demographics will conspire to prevent the country returning to anywhere close to pre-financial crisis
levels in real GDP terms.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Electioneering Could Derail Austerity Programme
Without a significant improvement in the economy, the ruling Syriza party will become increasingly desperate to close the gap in opinion
polls before the next election. This could lead to a suspension of the government's reform progress and a return to the anti-bailout and
anti-EU platform it was elected on.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Another Decade Of Austerity And Instability
Greece's political landscape is likely to remain tumultuous over 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 becoming even more fragmented. We,
therefore, expect a prolonged bout of austerity and instability in the decade ahead.
Chapter 4: Operational Risk
Operational Risk
TABLE: DEVELOPED STATES – LABOUR MARKET RISK INDEX
TABLE: DEVELOPED STATES – LOGISTICS RISK INDEX
TABLE: DEVELOPED STATES – CRIME AND SECURITY RISK INDEX
TABLE: DEVELOPED STATES – TRADE AND INVESTMENT RISK INDEX
Chapter 5: BMI Global Macro Outlook
As Good As It Gets?
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: GREECE – MACROECONOMIC DATA AND FORECASTS

Greece Country Risk Report Q4 2017

Core Views

With Greece's creditors not offering significant debt relief, and with theleft-wing Syriza government attempting to reduce the fiscal deficit viatax hikes instead of expenditure cuts, Greece's economy will remainon a very low growth trajectory. The economy will remain dependenton external aid by the time its current deal expires in 2018.

This view is underpinned by severe structural issues facing thecountry, namely an unsustainable government debt load, a diredemographic profile, and Greece's scant progress in improvingproductivity over the past few years.0
Although Greece's budget deficit is set to diminish in the years ahead,the country will remain dependent on bailout funds and debt reliefmeasures from its creditors if it is to make any dent in its massivedebt burden of around 180% of GDP.

The ruling Syriza-led coalition will continue losing support as disillusionedvoters move to opposition parties.

Greece will run a historically narrow current account deficit for thenext few years, reducing previously systemic risks posed to macroeconomicstability from its large external imbalances.


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