Alpha Bank: Investments in Greece increased in the first nine months of 2021 by 16.3% on an annual basis

Investments in Greece – according to the weekly bulletin of financial developments of Alpha Bank – increased in the first nine months of 2021, by 16.3% on an annual basis while it is estimated that they will further strengthen their momentum in the next three years, supported, to a large extent, from the financing that our country is expected to receive from the European Mechanism for Recovery and Sustainability and the structural reforms, within the framework of the National Recovery Plan, which aim at consolidating an environment that is friendly to entrepreneurship and investment.

The increase in investments in mechanical and technological equipment in the first nine months of 2021, – contributing about 41% of the total increase in investments – is of particular importance, as their decline over the past decade, weakened both quantitatively and qualitatively its natural capital (due to comparatively less integration of new technological innovations), leading to a decline in productivity.

Despite the adverse effects on productivity from supply chain disruptions during the pandemic, the significant increase in investment in capital equipment, combined with digitization and technological upgrades over the past two years, is expected to provide significant productivity benefits. , consequently strengthening the growth dynamics of the Greek economy.

The expected inflow of foreign direct investment (FDI) in the coming years is expected to contribute in this direction. The outbreak of the pandemic in 2020 halted the upward trend of foreign direct investment from 2016 onwards, with FDI declining by 37.3% in 2020, according to data from the Bank of Greece. However, as the European Commission states in its report (Annual Report on SMEs 2020/2021, July 2021), Greece has now shown that it is attracting FDI that could transform its productive model, such as research centers and investments in research and development by large multinational companies (eg Microsoft in Athens, Cisco in Thessaloniki and TeamViewer in Ioannina). At the same time, the transformation of the Greek economy into an attractive destination for FDI is expected to be supported by the high training of the workforce and the shift to technologically innovative investments.

Productivity, use of digital technologies and innovation

Small and medium-sized enterprises are the backbone of the Greek economy, accounting for 83% of total employment and 56.7% of total value added in 2020, percentages which are significantly higher than the European Union average, as shown in Graph 1. (65.2% and 53% respectively).

However, the productivity of small and medium-sized enterprises, which is defined as value added per employee, in Greece (Euro 11,400), lags significantly behind many European countries, such as Germany, Italy, Spain and Portugal, as well as the EU instrument. (Euro 40,000) (Graph 2a). This fact is connected, to a significant extent, with the fact that the Greek SMEs are lagging behind in terms of digitization and use of new technologies. Indicatively, it is mentioned that, according to the data of 2019, the percentage of Greek SMEs that make electronic sales amounts to 10.8%, which is the lowest percentage among the EU-27 countries, together with the corresponding one of Bulgaria (Graph 3 ). As a result, only 4% of SME sales in Greece are electronic, compared to 10.9% in the EU-27. It is worth noting that the countries with the highest percentages of e-sales in total are Ireland (29%), the Czech Republic (20.9%), Sweden (17.7%) and Denmark (17.6%). In addition, one in five SMEs uses some software (eg related to customer service) with the corresponding percentage in the EU-27 being 32.4%.

Finally, although the percentages of SMEs in Greece that use high technologies (eg cloud computing, 3D printing, analyzing big data) are generally lower compared to other European countries, the use of social networks in all, in terms of promoting their products, communicating with customers, developing partnerships, and even hiring is very common, with the corresponding percentages exceeding in some cases (eg for the evaluations of their products by customers the corresponding EU-27 averages.

In recent years, however, there has been an increase in entrepreneurship and innovation in Greece. According to a survey by the National Documentation Center (“Key indicators for innovation in Greek companies 2016-2018”), in the three years 2016-2018, innovative companies in Greece amounted to 60.3% of all companies, increased by 2, 6 percentage points compared to the period 2014-2016. These companies are active mainly in industry and especially in manufacturing (62.9% of companies), but also in services (58.9%), with the highest percentages of innovative companies in the tertiary sector being recorded in the information and communication (67.1%) and professional, scientific and technical activities (66.1%). It is noted, however, that the percentage of innovative enterprises depends on the size of the enterprise, as for small enterprises it rose to 58%, for medium-sized enterprises to 70.4% and for large enterprises to 87.3%.

In addition, according to the annual survey of the Global Entrepreneurship Monitor, in 2020, 8.6% of respondents aged 18-64 were young entrepreneurs, or owners-managers of start-ups, while the same ratio in 2010 was only 5.5% . The last indicator reflects the rise of early stage entrepreneurial activity in our country. In addition, according to a recent study by “diANEOsis” for startups in Greece, the majority (93%) were created in the period 2013-2020, with 20% of them having been established in 2018. The sectors in which they operate Most start-ups are tourism, IT and communications (ICT), agri-food and life and health sciences. 69% of startups in Greece are very small businesses and 27% small (EU data, December 2020).

The pandemic as a catalyst for digitization and the Recovery Fund

At the same time, the pandemic crisis had significant consequences for the media in Greece, both direct and indirect. In terms of direct effects, these were mainly negative, with 71% of companies – based on a survey conducted in the period October-November 2020, in the context of the EU study – reported that sales decreased their. The GDP of SMEs in our country decreased by almost 1/5, in 2020, compared to 2019. This percentage was the highest among the EU-27 countries, where the average was -7.6% ( Graph 2b). The decline in employment, however, was modest (-1.4%) and lower than the EU-27 average (-1.7%), as the business support and employment measures adopted by the Greek government were resulting in the maintenance – to a significant extent – of jobs. Regarding the productivity of Greek SMEs, it received a significant blow in 2020 (-18.6%). In 2021, the negative impact of the pandemic subsided and the above figures recovered, without, however, covering the losses of the previous year (excluding employment). More specifically, the EU estimates that the SME SME increased by 14.1% and amounted to 91.6% of the 2019 GDP, while the number of employees in SMEs increased significantly, by 10.6%, exceeding the corresponding level of 2019, by 9% . As a result, labor productivity is estimated to have risen by 3.2% in 2021, on an annual basis.

The pandemic crisis, however, in addition to the above, has also had indirect positive effects, primarily on the digital switchover. 53% of Greek media stated that the pandemic has changed the degree to which it uses technology, while 65% that it intends to integrate digital technologies into its operation in the future. Both percentages were the highest in the EU survey, which involved companies from eight other European countries.

The digital transition is an EU priority, as it is, along with the green transition, the two main objectives of the Recovery Fund. The National Plan for Recovery and Sustainability “Greece 2.0” includes a significant number of actions, investments and reforms in this direction that concern both the public sector and SMEs. Specifically, the second pillar of the Greek Plan concerns the digital transition (connectivity, digital transformation of state and business), has a total budget of Euro 2.1 billion and includes, especially for SMEs, investments of Euro 375 million that will be given with the form of grants, for the integration of new technologies of electronic payments, remote work, digital office, digital marketplace, Cybersecurity, etc., in order to improve their operation, productivity and competitiveness. Particular emphasis, as stated in the “Greece 2.0” Plan, will be given to the coverage of smaller companies.

The entire weekly bulletin of Alpha Bank’s financial developments is attached to the right column “RELATED ARCHIVES”.