The next tough opponent for households, businesses and the economy is inflationary pressures. “Whether they will turn out to be temporary or will become a more permanent phenomenon, is the question that concerns today, not only consumers and businesses, but also governments and central banks,” said Panagiotis Papazoglou, CEO of APE-MPE. consultant, EY Greece. He added that the spike in energy prices was triggered mainly by global economic factors, both in terms of supply and demand. To these pressures were added the disruptions in the supply chains created by the pandemic, thus creating the “perfect storm”.
“Based on this view, we can be optimistic that the phenomenon will escalate,” Papazoglou told APE. “There is no doubt that the energy market will remain extremely fluid as long as governments around the world do not more drastic and ambitious measures in the direction of green energy and renewable sources, so the question of when the situation will be normalized, I inflationary pressures remain, the ECB will be forced, sooner or later, to raise interest rates, with a direct impact on the country’s borrowing costs. ” Mr. Papazoglou estimates that the Recovery Fund provides a solution here as well, but we must move faster and bolder on the road to a green transition. The latest version of the EY global index for the attractiveness of RES, moreover, confirmed the potential of Greece in this area and I am optimistic that in the coming months we will see further improvement.
Price increases and new buying habits
But how do the wave of price increases in the basic consumer goods faced by consumers shape the new shopping habits after the pandemic? As Mr. Papazoglou explains to APE-MPE, the large survey presented by EY in May last year, Future Consumer Index Greece 2021, had already revealed that 60% of Greek consumers spend less on non-essential products. with 43% buying only the essentials. At the same time, two in three consumers (67%) had told us that price was now a more important criterion than before the pandemic, while almost 8 in 10 estimated that it would remain the most important criterion for the next three years. According to the same research, however, after the typology of consumers trying to “get by”, doing prudent financial management (Affordability first), significant proportions of consumers gave priority to health, the planet, experiences and society. The eighth edition of the Global Survey, released in November, found that consumers around the world continued to spend less on what they perceived as unnecessary goods for economic as well as environmental reasons, with the typology first putting its interest first. planet, had passed in the first place.
Today, with prices soaring, many consumers are being forced to cut spending even on basic necessities, which is changing the data again. “I believe that our research for Greece this year, which is expected in the coming months, will once again highlight the price and affordability of products as the dominant criterion, with the long-term effects of the pandemic having gradually begun to crystallize. This is something that “Brands should be taken into account, at a time when the pressures for stronger environmental and social action and value creation for all continue to intensify”, points out the head of EV Greece.
Challenges for economy and business
Focusing on the challenges that the Greek economy has to face this year, Mr. Papazoglou underlines that it has three main challenges ahead in 2022. The first is to make rapid use of the funds of the Recovery Fund to implement investments. which will give impetus to growth, at the same time drastically changing the orientation and productive model of our economy. A second challenge, and an equally important one, is to accelerate the implementation of reforms in the functioning of the State, Justice and Education, many of which are now associated with a significant percentage of the resources of the Recovery Fund. Finally, the recovery of the investment level remains a priority, which is a condition for the country to continue to have access to cheap borrowing even after the end of the ECB’s emergency bond purchase program. In terms of businesses in particular, the big challenge is to seize the opportunities created by the Recovery Fund and the new NSRF, especially in the areas of digital transformation, innovation, extroversion and the green transition. “The companies that will be able to meet the opportunities created with the help of different financing options, will be the ones that will grow and stand out in the coming years,” he points out.
The bet once again is how to ensure the viability and profitability of small and medium enterprises. “The answer for small and medium-sized enterprises lies in their drastic transformation, so that they can, on the one hand, overcome the pathogens of the past and, most importantly, respond to the great changes that are taking place today in the world,” said Mr. Papazoglou. However, it clarifies that small and medium-sized enterprises, in order to become internationally competitive, will have to place a much greater emphasis on technology, especially digital, and innovation. They should also invest in human capital, looking for the right executives and enhancing the retraining of existing staff in new skills focused on the future.
But the biggest challenge for businesses is extroversion. Greek companies, as well as the economy by extension, have paid dearly, in the past decade, for the lack of export orientation and dependence on the domestic market, a model that is not sustainable, especially for a small economy like the Greek one. Extroversion, however, is closely linked to the other big issue, which is the growth of small and medium-sized enterprises, which can be achieved through partnerships, mergers and acquisitions. To expand into international markets, in addition to investing in technology, people, research, and quality, you must gain a critical mass. At the same time, however, exports ensure economies of scale, leading to a virtuous cycle where extroversion boosts growth and vice versa. “This is the only viable recipe for competitiveness, profitability and, ultimately, the longevity of Greek small and medium enterprises,” said Mr. Papazoglou.
Source From: Capital