Abstract
The protests in Greece raised the political risk premium in the
country’s business environment, one that
transcends into the
infrastructure sector as well. The fragility of the government’s control
and the frail
mandate it has, jeopardises the planned investments in
infrastructure projects.
The deteriorating financial crisis and the
strained government finances - which limit the government’s
ability
to implement stimulus plans like other European peers - means that the overall
outlook for
investments in infrastructure has severely deteriorated since
our last report. In BMI’s Q109 Greece
Infrastructure Report, we
forecast that construction sector real growth will continue to go through
an
abrupt boom and bust period in the coming years. Gloom has spread in
the construction sector according
to the latest data by the national
statistics agency, which coupled by the wider macroeconomic and
political
grievances has prompted a much more bearish outlook on our part, with average
real growth for
the sector for the 2008 to 2012 period at 0.9%.
Uncertainly looms on the ability of the government to remain in power, the
implication of which on the
infrastructure sector is that any
institutional changes (OSE unbundling) and new projects (airports PPP)
will likely be put on hold. This however could not have come at a worse time.
The macroeconomic crisis
and alienation of the wider population from
government policies also jeopardises eliminating the progress
made in
terms of allowing greater private penetration in the infrastructure sector of
the country; a
structural change in perceptions of no small degree.
Traditionally, infrastructure development has been
considered solely a
public affair, run and operated by public bodies. We anticipate that so long
as the
government remains unpopular, any moves to hand over management of
ports, airports, railways or roads
to private operators (like COSCO with
Piraeus port for instance) will be met with a vehement response
from
unions and public servants. The same would apply for any possible unbundling
in the PCC, the state
owned utilities company, in spite of the fact that
the company itself has called for some structural reforms
to take
place.
Major players in the Greek infrastructure industry include locals
Elliniki Technodomiki-Aktor-TEB
Group, J&P-AVAX, Terna, Mytilineos, Aegek
and Athena, some of which also have significant
operations abroad, mainly
the Balkans and Middle East.
The private sector involvement becomes more
important when one looks at the macroeconomic
indicators. The budget will
come under strain from falling revenues and according to BMI forecasts,
the
ballooning external debt of the government will slow short-to-medium
term growth, as the government
has to revise its debt obligations and
fiscal responsibilities, potentially slowing the developments in the
infrastructure sector. This will further be accentuated with liquidity drying
up rapidly in the financial
system, and therefore raising capital will be
extremely difficult in 2009 and 2010.
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