ΕΤΕ

NATIONAL BANK OF GREECE | Greece: Macro View | July 2014
GREECE
Macro View
NATIONAL BANK
OF GREECE
February 2016
The Greek economy is proving unexpectedly resilient, overperforming

compared with the gloomy forecasts that followed the imposition of
capital controls. Employment creation has been ongoing, and VAT
revenue trends have improved notably in recent months, exceeding by a
significant margin the impact from the increase in the effective VAT rate
in July.
The resilience of activity, especially private consumption, does not

appear to be related to either increases in precautionary consumption or
domestic production. Indeed, NBG analysis suggests that the resilience of
consumption is related to the surge in cashless payments.
Cashless payments increased from 4.7% of GDP in 2014 to an estimated

6.8% in 2015, rising 90% y-o-y in H2:2015, compared with an average of
12% in Southern Europe and 15.5% in the euro area. The increase in this
form of payment appears to have prompted a shift in activity from the
shadow to the official economy, which mostly benefited larger
enterprises, to the detriment of SMEs (an annual change in sales of
-3.3% for large firms in Q3:2015 versus a decline in excess of c. 15% for
SMEs).
NBG Research estimates that an annual increase of 10% in cashless

transactions adds about 0.2% to GDP growth. Indeed, it is estimated to
have added almost 1.4 pps to real GDP growth (y-o-y) in H2:2015 and an
estimated 0.8% in FY:2015 GDP, resulting in GDP growth of about -0.3%
in FY:2015 versus an initially-estimated -2.3% by the official sector.
Moreover, employment increased by 2.2% y-o-y in July-October, all
dependent employment, while self-employment declined. Finally, VAT
revenue increased by an estimated 10.5% y-o-y in H2:2015.
Increasing cashless
transactions shrink the shadow
economy and support activity
Macroeconomic Indicators
& Fiscal Outlook, pages 14-19
Cashless payments have been a key driver of economic

performance in H2:2015
GDP forecasts - impact of declining shadow activity and oil prices

H2:2015 FY:2015 FY:2016
2016-20
avg.
y-o-y change
GDP constant prices y-o-y

Paul Mylonas, PhD
(+30210) 334 1521
e-mail: pmylonas@nbg.gr
-1,3
-0,3
-0,2
2,5
contribution of declining shadow economy (in pps)
1,4
0,8
0,7
0,5
contribution of energy prices (in pps)
1,2
1,3
0,6
0,0
-3,9
-2,4
-1,5
2,0
GDP constant prices (excl. supportive factors) y-o-y

Source: ELSTAT, NBG Econ. Analysis estimates
NBG Economic Analysis Department

86 Eolou Str., 102 32 Athens, Greece
https://www.nbg.gr/en/the-group/press-office/e-spot
Greece
Macro View
February 2016
In 2016, GDP growth is estimated at -0.2% y-o-y. The economy will benefit
from a further increase in cashless payments by about 2.5% of GDP,
estimated to result in further support to the official economy (+0.7% to
FY:2016 GDP growth), as well as from lower energy prices (+0.6% to
FY:2016 GDP growth). On the other hand, fiscal drag will hold back
activity (-1.4% y-o-y). Excluding GDP carry (-0.8% y-o-y), activity will have
positive momentum in 2016, turning positive in Q2 (q-o-q s.a. basis) and
with Q4 growth at 1.7% y-o-y.
Over the longer run, NBG Research estimates that through a continued
increase in cashless payments to close to the average of Southern euro
area countries (12% of GDP -- average for Spain, Portugal and Italy in 2014
-- from 6.8% in Greece currently), Greeces shadow economy could be
reduced to 19.3% of GDP during the next 5 years. This would add about
0.5% to average annual GDP growth in the period 2016-2020, which is
equivalent to 4.5 bn. Furthermore, it would also lead to 1.5 bn of
additional government revenue in the period (0.8% of 2015 GDP),
admittedly valuable support to the medium-term fiscal adjustment
effort.
In view of the significance of cashless payments for supporting activity

and tax revenue, the provision of incentives for increasing further the
penetration of electronic payments in the Greek market is essential. Such
incentives could include:
Incentives provided by tax authorities, such as the conditioning of

the application of the tax-free income threshold to the total value
of cashless transactions made by the taxpayer and/or to specific
categories of purchases of goods and services with a high share of
informal transactions
Tax benefits could also be provided to entrepreneurs for accepting

electronic payments, possibly related to the annual growth in their
POS-based turnover (especially for SMEs)
Other administrative decisions, such as those lowering further the

threshold above which cash transactions are prohibited, or
legislation for compulsory use of cashless payments in activities
with a high tendency for tax evasion (such as personal
transportation, services to households, health and education)
An imminent policy challenge is to maintain the favorable momentum in

bringing down unreported activity and, at the same time, push forward
with the timely lifting of capital controls to reverse the associated costs.
In fact, the latter have started to manifest themselves, mainly through
the sharp decline in private capital inflows to the economy.
Greece: Economic & Market Analysis | January 2014| p. 2
NATIONAL BANK OF GREECE | Greece: Macro View
Increasing cashless transactions shrink the shadow

economy and support activity
Nikos S. Magginas, PhD
The resilience of economic activity cannot be explained by

conventional fundamentals, and largely reflects surprisingly
buoyant consumption
Head of Greece Macro Analysis
(+30210) 334 1516
e-mail: nimagi@nbg.gr
Effrosyni Alevizopoulou, PhD

(+30210) 334 1620
e-mail:ALEVIZOPOULOU.E@nbg.gr
Aikaterini Gouveli, MSc

(+30210) 334 2359
e-mail: gouveli.aikaterini@nbg.gr
The Greek economy is proving

unexpectedly resilient in the face of
capital controls
The Greek economy is proving unexpectedly resilient,

overperforming compared with the gloomy forecasts for Q3:2015
that followed the imposition of capital controls and the three week
bank holiday in July. Indeed, high uncertainty, which had begun in
late-2014, continued until the snap elections of September, despite
the positive development on economic sentiment from an agreement
on a third financial support package for Greece.
_______________________________________________
GDP growth (NBG forecasts and

implied official forecasts as of Q3:2015)
6
y-o-y
forecasts
3
2
1
0
-1
-2
-3
-4
-5
-6
3
0
-3
-6
-9
2016:Q4
2016:Q1
2015:Q2
2014:Q3
2013:Q4
2013:Q1
2012:Q2
2011:Q3
2010:Q4
2010:Q1
2009:Q2
-12
GDP (q-o-q, s.a., right axis)

GDP growth (y-o-y, left axis)
GDP Official scen. (y-o-y, s.a., left axis)
Healthy private consumption, solid

tourism activity and a sharp import
contraction offset the negative
impact of falling investment and
inventories in Q3:2015
_______________________________________________
GDP decomposition - spending

categories
7
4
1
-2
-5
-8
contributions in
pps
-11
2015:Q4
2015:Q2
2014:Q4
2014:Q2
2013:Q4
2013:Q2
2012:Q4
2012:Q2
2011:Q4
2011:Q2
-14
Consumption
Net Exports
Investment
Inventories
Growth
Sources:ELSTAT, EU Commission, MinFin, NBG

estimates
In this very challenging environment, Greek GDP declined by -1.1%

y-o-y (constant prices) in Q3:2015, compared with initial official
estimates for an average GDP contraction of -5.0% y-o-y. Resilient
consumer spending (+0.3% y-o-y), despite a capital controls-led drop
in imports (-19.9%) and solid tourism activity (increase in revenue of
+5.9% in 11M:2015), offset a significant part of the hit from: i) the
12.9% y-o-y decline in investment spending in Q3:2015 due to high
uncertainty and limited liquidity; ii) a sharp drop in inventories (by
2.6% of quarterly GDP in Q3:2015); and iii) the collapse in shipping
services.
It is admittedly remarkable that in this turbulent environment, the
share of private consumption in GDP reached a 4-year high of 69.7%
(in Q3:2015). Indeed, private consumption increased by 0.3% y-o-y in
Q3:2015 (-0.8% q-o-q, s.a.) in a period of very high uncertainty arising
from: i) the return of Grexit scenarios or a temporary suspension of
euro membership; ii) the three-week bank holiday and the imposition
of capital controls in July; iii) a fiscal drag of c. 0.7% of GDP from the
new revenue measures implemented in this quarter; and iv) payment
delays by the government Budget reflected in the accumulation of
new arrears to the private sector and a sharper-than-budgeted
restraint on primary spending (including social transfers).
Before turning to an analysis of the resilience of private consumption,
an overview of the other factors of demand reveal that overall they
were a drag on Q3 activity. First, the decline in imports reflected
lower investment and inventories. Specifically, the sharp decline in
goods imports, down 16.3% y-o-y in volume terms in Q3:2015,
contributed 4.3 pps to quarterly GDP growth, mainly due to the
binding limits on import financing in July-August, especially in nonbasic goods categories. Indeed, as discussed in our NBG Macro view
GREECE | NBG Macro View | February 2016| p. 3
Private consumption has proved

resilient
_________________________________________
Share in GDP of major components (constant prices)
2008 2009 2014 2015e
Private consumption
68,2%
70,1%
68,7%
69,4%
Gross Fixed Capital

formation
22,8%
20,6%
11,5%
10,9%
Inventories
1,1%
-2,5%
0,6%
-0,3%
Total exports
23,3%
20,0%
29,9%
28,8%
Exports of goods
10,0%
9,1%
15,0%
15,4%
Exports of services
13,4%
10,9%
14,9%
13,6%
35,9%
30,0%
32,4%
30,3%
Total imports
Components as % of GDP
in a very challenging environment

with high uncertainty
_______________________________________________
Private consumption and

consumer confidence
8
6
4
2
0
-2
-4
-6
-8
-10
-12
-14
-35
-45
-55
-65
-75
2015:Q4
2015:Q1
2014:Q2
2013:Q3
2012:Q4
2012:Q1
2011:Q2
2010:Q3
2009:Q4
2009:Q1
2008:Q2
2007:Q3
2006:Q4
-85
Private consumption s.a., y-o-y growth (left axis)

Consumer confidence (right axis)
Services exports fell sharply, despite

favorable tourism
_______________________________________________
19
14
Total imports & tourism

revenue
y-o-y,
4q m.a.
y-o-y
19
14
-1
-1
2015:Q3
2015:Q1
2014:Q3
2014:Q1
2013:Q3
2013:Q1
2012:Q3
2012:Q1
-21
2011:Q3
-16
-21
2011:Q1
-11
-16
2010:Q3
-6
2010:Q1
-6
-11
Tourism revenue (y-o-y, 4q m.a.)

Total imports (chain linked volumes, y-o-y)
Sources:ELSTAT, BoG, , NBG estimates
October 2015, the approvals for goods imports financing in JulyAugust were 30% below the import level in the same period in 2014,
though this gap has narrowed considerably, to below 10% in
September-October. The counterpart to the decline in imports is
reflected in the contraction in fixed capital formation and inventories,
which subtracted about 3.9% from annual GDP growth.
Second, far-better-than-expected tourism activity during this
challenging period -- another positive surprise -- was more than offset
by the poor performance of shipping. Indeed, tourism revenue
increased by 5.2% y-o-y in Q3:2015 (+0.4 bn compared with
Q3:2014), providing considerable support to GDP (an estimated 0.8%
y-o-y in Q3:2015. This outcome, however, has been overshadowed by
a sharp fall in other services exports (-49% y-o-y, in nominal terms,
mainly due to the collapse of shipping revenue by 63% y-o-y or -1.7
bn in this quarter). As a result, total services exports in Q3:2015
declined by 24.9% y-o-y in constant prices (to 12.1% of GDP in
Q3:2015 from 15%, on average, in FY:2014).
Third, goods exports also weathered the challenges of capital
controls, growing by 0.7% y-o-y in Q3:2015 (in volume terms) and
their share in GDP climbed to their highest level in decades (16% of
GDP compared with 10.1% on average between 1995 and 2014).
Turning to private consumption, in order to estimate the impact of
extraordinary factors, we estimate a traditional consumer-demand
model. The model describes consumer-spending growth as a function
of the annual growth of total employment compensation (in constant
prices), domestic fuel prices and consumer confidence -- as an allencompassing measure of uncertainty and liquidity conditions.
Although the historical fit of the model is reasonably strong, modelbased estimates for private consumption growth in Q3:2015 fell
considerably short of the actual increase in private consumption
(-1.4% versus +0.3% according to official data).
The model shows the impact from declining labor income, limited
liquidity, and higher uncertainty outweighing the benefit from rapidly
declining international oil prices (-35.8% y-o-y in Q3:2015, in euro
terms, and -14.6% for domestic fuel prices, contributing an estimated
+1.3% to GDP growth, see analysis in NBG Macro View, April 2015).
Indeed, it is difficult to justify a marginal increase in private
consumption, on an annual basis, in a period when the average real
wage per employee is estimated to have declined by 1.5%-2% and
consumer confidence fell to its lowest point since Q4:2013.
Extraordinary factors appear to have

supported consumer spending in
Q3:2015
_______________________________________________
Private consumption - actual and

NBG model estimates
18,0
15,0
3
0
12,0
-3
9,0
-6
6,0
-9
3,0
-12
0,0
-18
-3,0
2006:Q3
2007:Q2
2008:Q1
2008:Q4
2009:Q3
2010:Q2
2011:Q1
2011:Q4
2012:Q3
2013:Q2
2014:Q1
2014:Q4
2015:Q3
-15
Actual minus fitted (y-o-y change, right axis)

Actual (y-o-y change, left axis)
Fitted (y-o-y change, left axis)
Low oil prices provided a valuable

respite to the oil-dependent Greek
economy
_______________________________________________
Crude oil prices and EUR/USD

exchange rate
1,5
USD
exch. rate
130
110
1,1
90
0,9
70
0,7
50
0,5
30
Apr-11
Aug-11
Dec-11
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
Dec-13
Apr-14
Aug-14
Dec-14
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
1,3
EUR/USD exch. rate (left axis)

Crude oil price in USD (right axis)
Retail sales data did not provide any

evidence of an upsurge in
precautionary consumption in
June-August 2015
Retail sales volume
June-Aug
-2
-2
-6
-6
-10
-10
-14
-14
-18
-18
y-o-y change
Sep-15
Nov-15
Jul-15
May-15
Jan-15
Mar-15
Nov-14
Jul-14
Sep-14
-22
May-14
-22
Furniture & household equipment

Super markets
Department Stores
Sources:NBG estimates, ELSTAT, Bloomberg
The above results indicate there are other factors at play in this
period, which are not included in our consumer demand model
specification. Two potential explanations -- an upsurge in
precautionary consumption and a shift to domestically-produced
consumption -- are not consistent with the data. Regarding the
former, the composition of retail sales does not support the
hypothesis of higher spending due to uncertainty in Q3:2015. Indeed,
retail sales volumes (excl. fuel) declined by 2.8% y-o-y in July-August,
with sales in supermarkets and department stores down by 3.3%
y-o-y and 5.6% y-o-y, respectively, in contrast to sales of consumer
durables which are better proxies for precautionary consumption
-- which shrank by 14.7% y-o-y in this period. In fact, some indication
of this precautionary spending appears to have mainly affected June
sales, while car registrations increased by 22% y-o-y, and
supermarket and clothing-footwear sales by 1.2% y-o-y and 4.2%
y-o-y, respectively.
Regarding the latter explanation, manufacturing production data do
not support a shift of demand to domestic production (-1.2% y-o-y in
July-August), with domestic production in consumer-related
categories such as food and clothing declining by 2.0% y-o-y and
19.4% y-o-y, respectively, in Q3:2015. Moreover, the sharp drop in
stocks of finished goods -- reflected in the reduction in inventories
(-2.6% of Q3:2015 GDP) -- also suggests that resilient consumption
has occurred through inventory depletion largely involving
imported goods rather than through an increase in domestic
production.
An explanation which holds up to scrutiny is the upsurge in cashless
payments due to the imposition of capital controls. As analyzed
below, higher cashless payments translate into a direct shift in
spending in the official economy from the unofficial/shadow
economy. If the unexplained consumption of about 1.7% y-o-y is due
to this shift, then it has led to an increase in activity of over 1% y-o-y
in Q3 GDP.
The surge in cashless transactions discourages informal activity

Shedding light on Greeces shadow economy
Greeces shadow economy is estimated at 44 bn (or 25% of GDP) in
2014 (Schneider, OECD, 2014). The Greek shadow economy is among
the largest in the euro area (together with the Baltic countries and
Cyprus) and is considered to reflect the long-lasting competitive and
fiscal deficiencies of the economy. Clearly, the support to GDP growth
Capital controls have greatly altered

transaction habits
_______________________________________________
5000
Payment transactions per card

issued in the country - 2014
4500
4000
3500
3000
2500
estimate
for 2015
2000
1500
1000
0
France
Finland
UK
Portugal
Netherlands
Belgium
EA
Ireland
Austria
Italy
Cyprus
Spain
Lux
Slovenia
Germany
Czech
Latvia
Malta
Greece
500
triggering a shift to cashless

transactions
_______________________________________________
Domestic payment transactions

using cards
210
index
June = 100
from a sustainable reduction of the shadow economy -- to levels

comparable with the euro area average of 15% of GDP, or at close to
the 19% of GDP average for southern euro area countries would be
significant.
International experience suggests a strong positive correlation
between the size of shadow activity and the role of cash transactions
in the economy, as the use of cash minimizes the risk of being tracked
by fiscal authorities. Not surprisingly, Greece is among the most cashdependent economies in the euro area, with cashless transactions
accounting for less than 5.0% of GDP until 2014 one of the lowest
rates in the euro area, which has an average of 15.5% of GDP.
Moreover, though Greece was only slightly below the euro area
average as regards the number of cards issued per capita (1.2
compared with 1.4 for the euro area in 2014), the utilization rate was
extremely low, as measured by the value of average annual payments
per card (312 in Greece versus a euro area average of 3,800 in
2014).
Indeed, the dominant role of micro enterprises in Greeces business
structure (77% of private sector employment compared with 61% in
the euro area) and the high share of self-employed in total
employment (25%, the highest share in the euro area, compared with
a euro area average of 10%), appear to be closely related to both the
economys large informal sector and the high cash dependence of the
economy. The greater tendency for tax evasion is confirmed by the
extremely low contribution of freelancers and micro enterprises to
government tax revenue (e.g., self-employed and small business
owners jointly account for 30% of employment and less than 15% of
PIT revenue).
170
Capital controls have greatly altered transaction habits
130
Source: FEIR & NBG
research est.
90
Number of transactions
Dec-16e
Sep-15
Aug-15
Jul-15
Jun-15
50
Total value
Sources:ECB, IOBE/FEIR, NBG estimates
The sharp increase in uncertainty-driven cash hoarding beginning in

late-2014 -- with 51.7 bn of sector bank deposits withdrawn from
Greek banks between November 2014 and July 2015 -- and the
imposition of weekly limits on cash withdrawals since July as part of
the introduction of capital controls, have led to a significant increase
in remote payments and debit/credit card use. As mentioned above,
these had been far less common in Greece than in other European
countries.
Most deposit withdrawals in H1:2015 were made for precautionary
reasons in a period of high uncertainty related to a potential Grexit,
and thus, these liquidity holdings were unlikely to have been used for
financing current household spending, except for imminent fiscal and
Most of the sizeable deposit

withdrawals in H1:2015 were made
for precautionary reasons and not for
consumption smoothing
_______________________________________________
Private sector deposits

120
% GDP
110
100
90
80
70
60
50
Dec-15
Feb-15
Jun-13
Apr-14
Oct-11
Aug-12
Feb-10
Dec-10
Jun-08
Apr-09
Oct-06
Aug-07
40
Non-euro area residents

Non-financial enterprises
Households
Greeces shadow economy is among

the largest in the EU
_______________________________________________
Size of shadow economy as

percent of GDP - 2014
BG
LT
CY
LV
% GDP
SI
PL
GR
HU
IT
PT
EU
ES
BE
CZ
SK
SE
FI
DK
debt-servicing needs. In fact, Greek households viewed euro notes

mainly as a store of value and as a protection against the risks of a
bank deposit bail-in or currency redenomination, rather than a means
of transaction. Indeed, the effect of cash-burn (i.e., the use of cash
holdings to smooth consumption) appears to have been less
prominent than in the period 2010-2012 since the bulk of the
adjustment in spending habits has already occurred. Balance of
payments and national savings data in 2010-2012 point to an average
financing gap (negative savings) of the Greek private sector of almost
10bn per annum, which had been financed mainly through
cash/liquidity burn. In 2013 and 2014, this gap narrowed to c. 2 bn,
and declined further to an estimated 1 bn in 2015. In this respect, a
negligible share of the 51.7 bn deposit reduction between
November 2014 and July 2015 could be attributed to cash-burn.
Based on 4 systemic banks and HBA data, Greek banks are estimated
to have issued more than 1.8 million debit cards in 2:2015
(corresponding to an increase in the outstanding amount of cards of
almost 15%, the most part of which occurred in Q3:2015). In a similar
vein, new Point of Sale (POS) terminal installations exceeded 40,000
in this period and more than 120,000 new e-banking passwords were
issued.
Accordingly, cashless transactions soared in Q3:2015, by an
estimated 160% y-o-y as regards the number of transactions, and by
about 130% y-o-y in value terms, with the food sector recording a
significant rise of almost 250%, as did the health sector (+180%) and
petrol stations (+160%). Data for the small retail, accommodation,
food and personal services sectors are scarce, but market sources
also report a significant increase in cashless transactions in these
sectors since July that reached an estimated 150% y-o-y in Q3:2015.
According to these sources, the number of debit/credit card
transactions as a percentage of total transactions in retail trade
increased to above 40% in July-September from about 15% in
H1:2015. This trend is also reflected in POS turnover data for debit
cards, which is reported to have almost doubled compared with the
same period of the previous year.
DE
IE
FR
GB
NL
AT
0
10
15
20
25
30
Sources:ECB, BoG, OECD,Schneider 2013-14, NBG

estimates
The above trends are reported to have continued in Q4:2015 when

seasonal spending for goods and services, in conjunction with fiscal
obligations, is typically high. Accordingly, the average value of
cashless transactions (residents and non-residents) is estimated to
have increased by 90% y-o-y, on average, in H2:2015 and by 47% y-oy in FY 2015 (equivalent to 6.8% of GDP in 2015, up from 4.7% in
2014).
Higher cashless payments are estimated to have added about 1.4 pps
to annual GDP growth in H2:2015
There is a strong correlation

between the amount of shadow
activity and cash use
_______________________________________________
Use of cashless payments & size

of the shadow economy - 2014
Shadow economy (% GDP)
35
BG
RO
30
25
HR
CY
MT
SI
HU
GR
20
IT
PT
ES
CZ
SK
15
10
BE
DE
IE
FR
AT
DK SE
FI
GB
NL
5
0
0
60
120
180
240
300
360
It must be stressed that changes in the size of the shadow economy

have a strong bearing on macroeconomic trends. Indeed, a growing
shadow economy creates a downward bias in official statistics (mainly
by affecting national accounts and labor force survey data) and
undermines fiscal efficiency by narrowing the tax base and distorting
the design of the social policies. The recent change in payment habits
in Greece has had the opposite effect, with a shift of activity from the
informal to the formal economy, and is estimated to significantly
improve GDP, employment and fiscal developments.
420
Number of cashless transactions per capita
A shift to formality supports larger and more competitive businesses
Production of larger business units

showed notable resilience in
Q3:2015
_______________________________________________
Sectoral value added

(Manufacturing, energy, mining)
& GDP growth
2
y-o-y
-1
-4
-4
-7
-7
-10
-10
-13
-13
2010:Q4
2011:Q1
2011:Q2
2011:Q3
2011:Q4
2012:Q1
2012:Q2
2012:Q3
2012:Q4
2013:Q1
2013:Q2
2013:Q3
2013:Q4
2014:Q1
2014:Q2
2014:Q3
2014:Q4
2015:Q1
2015:Q2
2015:Q3
-1
GDP growth (y-o-y, constant prices)
Mining, manufacturing & energy (y-o-y)
as did large corporate profitability

_______________________________________________
Total compensation of employees

vs gross operating surplus and
mixed income
0
-2
y-o-y,
2q m.a.
-2
2015:Q3
2015:Q1
-12
2014:Q3
-10
-12
2014:Q1
-10
2013:Q3
-8
2013:Q1
-6
-8
2012:Q3
-6
2012:Q1
-4
2011:Q3
-4
Total compensation of wage earners

Gross operating surplus and mixed income
Sources:ECB, ELSTAT, NBG estimates
The increasing pressure on Greek businesses to comply with their

customers demand for acceptance of cashless means of payments
supported official activity by: i) entailing a shift of demand from
informal/shadow suppliers of goods and services to formal
enterprises operating in the official economy; ii) forcing some smaller
enterprises and own-account workers involved in unofficial activities
to turn to the official economy; iii) depressing or suspending activities
of the shadow economy in the absence of sufficient cash; and iv)
supporting domestic suppliers due to constraints in transactions with
abroad. The above developments encouraged healthy and taxcompliant business activity especially of larger enterprises -- and
thus supported official GDP figures and tax revenue.
In this context, firms that managed to adapt quickly to this new
environment of limited cash obtained a competitive advantage over
their cash-dependent competitors, mostly SMEs. The adaptation of
larger firms to the new transaction environment was relatively
effortless and costless compared with smaller firms and freelancers,
which have been challenged by the new conditions.
In this regard, larger enterprises clearly overperformed the smaller
and the more cash-dependent firms in terms of turnover and
profitability. Indeed, sales of medium-to-large sized enterprises (excl.
fuel and financials) is estimated to have declined by about 3.3% y-o-y
(ICAP and ELSTAT data) and by about 2.5% in constant prices in
Q3:2015 and profitability, as proxied by the gross operating surplus,
remained broadly stable in Q3:2015 (nominal terms, national
accounts data) compared with the same period in 2014. In contrast,
sales of micro and small firms fell by more than 15% y-o-y (see NBG,
EC business surveys are also

pointing to a sharp improvement in
business prospects for medium and
large-sized enterprises
EC business confidence indicators

30
10
30
EC sectoral confidence
indicators, index level
10
-10
-30
-30
-50
-50
-70
-70
-90
-90
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
-10
Industrial
Retail
Construction
Services
whereas smaller businesses and

the self-employed have been
disproportionately affected by the
capital controls
_______________________________________________
Employment growth
5
5
y-o-y
Wage earners
2015:Q3
2015:Q1
2014:Q3
2014:Q1
-15
2013:Q3
-15
2013:Q1
-10
2012:Q3
-10
2012:Q1
-5
2011:Q3
-5
2011:Q1
2010:Q3
Self employed
The strong rebound in VAT revenue

largely reflects a shrinkage of
shadow activity in Q3:2015
VAT & VAT excluding fuels

revenue
10
14
y-o-y
10
Q4:2015
Q2:2015
-18
Q4:2014
-14
-18
Q2:2014
-10
-14
Q4:2013
-6
-10
Q2:2013
-2
-6
Q4:2012
-2
Q2:2012
Q4:2011
Q2:2011
The remarkably rapid and broad-based recovery in sectoral business

confidence indicators (IOBE/EU Commission) in recent months is also
suggestive of improving conditions for medium and large sized
enterprises, which are the main contributors to these surveys.
Labor market resilience only applies to wage earners
Labor market developments are also suggestive of the changes
occurring in the business environment under capital controls.
Employment developments reveal two divergent trends underlie the
remarkably solid employment growth in Q3:2015 (+2.3% y-o-y in
Q3:2015 and +1.5% in H1:2015). Indeed, the net employment
creation of 45,000 jobs in Q3:2015 (compared with the previous
quarter) reflects an increase in dependent (wage earners)
employment of 60,000, which more than compensated for a net
decline in the number of self-employed, business owners and family
workers of c. 15,000 during this period. In particular, the selfemployed/freelancers sub-segment suffered the largest losses in four
years in Q3:2015 (employment decline of -4.4% y-o-y), exemplifying
the pressures from capital controls on small entrepreneurs. The
above developments are indicative of an evolving business
rebalancing under capital controls, which is compounded by the
broad-based labor market adjustment and the notable increase in
dependent employment flexibility in previous years.
The surge in VAT revenue confirms the shift to the official economy
_______________________________________________
14
Survey of Greek SMEs - January 2016), and profitability by an

estimated -6% y-o-y (NBG economic analysis, estimate of mixed
income change), suggesting a significantly higher hit to business
segments typically characterized by a higher tendency for informal
operations.
VAT revenue trends in H2:2015 provide further indication of a first

win in the battle against the shadow economy. In particular, non-fuel
VAT revenue trends showed a notable improvement since July -increasing by 10.5% y-o-y in H2:2015 compared with a decline of 4.8%
y-o-y in H1:2015 -- despite the evident weakening in economic
activity in H2 (real GDP declined by -1.1% y-o-y in Q3:2015 and by an
estimated -1.3% y-o-y in H2:2015, compared with an increase of 0.7%
in H1:2015). In fact, VAT receipts showed signs of further acceleration
in Q4 (+14.4% y-o-y), despite the waning support from tourism during
this period.
VAT excl. fuels (y-o-y change)

VAT (y-o-y change)
Sources:EU Commission, ELSTAT, NBG estimates
The observed revenue growth in H2:2015 exceeds, by a significant

margin, the 2016 Budget projections for growth in VAT revenue of c.
6.0% y-o-y in the same period, adjusting for the more optimistic
Budget assumptions for nominal GDP growth in H2:2015 of about
-1.0% y-o-y compared with NBG projections of -1.8% y-o-y. Note that
the MoF projections reflect the net impact from the increase in the
statutory average VAT rate of about 2.0 pps (from the transfer of
about 20% of goods and services to the high VAT rate of 23% from
13% effective from July 20 2015).
that gained further traction in

Q4:2015
_______________________________________________
VAT excluding fuels revenue and

GDP growth
14
y-o-y
y-o-y
12
9
6
3
0
-3
-6
-9
-12
-15
10
6
2
-2
-6
-10
-14
*GDP: Q4:2015 est.
Q4:2015
Q2:2015
Q4:2014
Q2:2014
Q4:2013
Q2:2013
Q4:2012
Q2:2012
Q4:2011
Q2:2011
-18
Real GDP growth (y-o-y, right axis)
The potential for increasing tax

efficiency is significant
_______________________________________________
Shadow ecomomy & VAT Gap 2012

LT
VAT Gap (%GDP)
LV
GR
HU
IT
PL
CZ
FR
ES
AT
DE
IE
GB
NL FI
PT
BE
0
0
10
15
20
25
30
Significant future output gains from further use of electronic

payments
Looking forward, as the size of the shadow economy relative to Greek
GDP remains significantly higher than the euro area average (an
estimated 23.8% of GDP in 2015 versus 15.0% for the euro area-11
and 19.3% for the average of Spain, Portugal and Italy in 2014), there
is still ample margin for sustainable positive effects on growth from a
further shift of unreported activity to the official economy.
VAT excl. fuels (y-o-y, left axis)
We estimate that the positive surprise in VAT revenue in H2:2015

corresponds to an effective broadening of the tax base by about 1.3
bn (4.6 pps x 28 bn non-fuel VAT tax base). This is equivalent to c.
1.4% of H2:2015 GDP, and is consistent with our estimate for higher
activity derived from our consumption model.
35
Shadow economy (%GDP)
Sources:MinFin, Eurostat, NBG estimates & seasonal

adjustments
Our estimates of the potential contribution to GDP growth from

declining shadow activity and the implicit role of cashless payments
are derived by combining information from the observed increase in
the VAT base in H2:2015 and the related upsurge in cashless
payments during this period. Indeed, the estimated increase in the
value of cashless transactions of 90% y-o-y in H2:2015 (or +3.8 bn in
this period) corresponds to an increase in the registered economywide final spending of about 1.0 bn during H2:2015 if one
conservatively assumes that the share of shadow activities in newlyrecorded cashless transactions is equal to the economy average size
of shadow activity in 2014, i.e., c. 25% of GDP. The latter assumption
is consistent with the above-described increase in activity implied by
VAT trends, as well as the residual from our consumption model.
Therefore, an annual increase of 10% in cashless transactions adds
almost 0.2% to real GDP growth.
In 2016, NBG Research estimates that activity will be broadly similar
to 2015, with increasing momentum during the year. It will receive
support from a further shift in the use of cashless transactions.
Specifically, GDP is estimated to decline marginally (-0.2% y-o-y in
2016, in constant prices, versus -0.3% in FY:2015). A positive annual
impact of +0.7 pps arises from a further decline in shadow activity
There is still ample margin for

positive effects on growth from a
further shift of unreported activity to
the official economy
_______________________________________________
Size of the shadow economy as

percentage of GDP
30
30
18
15
15
12
12
2009
2005
2019e
18
2017e
21
2015e
21
2013
24
2011
24
2007
27
2003
27
Greece
Euro area 11
Arithmetic average of Spain, Italy, Portugal
with electronic payments playing a

central role
_______________________________________________
Value of payment transactions at

POS terminals as percentage of
GDP
14
euro area 11
14
11
11
%GDP, residents and non-residents
Greece
Spain
2015*
2014
2013
2
2012
2
2011
2010
2009
through a further increase in cashless transactions by 32% y-o-y

compared with their 2015 level (to 9.2% of GDP by end-2016 from an
estimated 6.8% in 2015) an increase of 14% y-o-y excluding carry
effects from 2015. Further support arises from: i) the decline in
domestic energy prices by an estimated 12% y-o-y, which contributes
another 0.6 pps to activity); ii) improving sentiment; and iii) positive
tourism and liquidity trends (reflecting, inter alia, a gradual clearance
of government arrears). On the other hand, activity will be held back
by continuing fiscal drag (-1.4% y-o-y) and negative carry (-0.8%
y-o-y).
Italy
Sources:MinFin, Eurostat, NBG estimates & seasonal

adjustments
In the longer run, a cumulative increase in cashless payments closer

to the average for Spain, Portugal and Italy (c. 12% of GDP in 2014)
would lead further reduction of Greeces shadow economy.
Specifically, if cashless transactions increase to about 12% of GDP by
2020, the shadow economy would decline to 19% of GDP over the
next 5 years compared with an estimated 23.8% in 2015, and is
expected to add about 0.5% to average annual GDP growth in the
period 2016-2020. A similar pace of increase in cashless transactions
(about 20% y-o-y, per annum, in 2016-2020) and shrinkage of the
shadow economy (by c. 1% of GDP per year in 2016-2020) has been
observed in several EU countries in the past 10 years (e.g. Czech
Republic, Slovenia, Slovakia, Baltic countries).
Moreover, the above trends would be translated into an estimated
cumulative increase in government revenue of about 1.5 bn in the
period 2015-2020 (0.8% of 2015 GDP), an admittedly valuable
support to the medium-term fiscal adjustment effort.
Thus, the creation of additional, credible incentives for avoiding the
use of cash in transactions could give a decisive boost to both
compliance and the economic performance.
In view of the significance of cashless payments for supporting
activity and tax revenue, the provision of administrative and marketbased incentives for increasing further the penetration of electronic
payments in the Greek market is essential. Such incentives could
include:
Incentives provided by tax authorities such as the

conditioning of the application of tax-free income threshold
to the total value of cashless transactions made by the
taxpayer and/or to specific categories of purchases of goods
and services with a high share of informal transactions
GDP forecasts - impact of declining shadow

activity and oil prices
H2:2015 FY:2015 FY:2016
Tax benefits could also be provided to entrepreneurs for

accepting electronic payments, possibly related to the annual
growth in their POS-based turnover (especially for SMEs)
Other administrative decisions such as those lowering further

the threshold above which cash transactions are prohibited,
or legislation for compulsory use of cashless payments in
activities with a high tendency for tax evasion (such as
personal transportation, services to households, health and
education)
2016-20
avg.
y-o-y change
GDP constant prices y-o-y -1,3
-0,3
-0,2
2,5
contribution of
declining shadow
economy
1,4
0,8
0,7
0,5
contribution of energy
prices
1,2
1,3
0,6
0,0
GDP constant prices

(excl. supportive factors)
y-o-y
-3,9
-2,4
-1,5
2,0
A unique opportunity and an immense policy challenge

An imminent policy challenge is to maintain the favorable momentum
Source: ELSTAT, NBG Econ. Analysis estimates
in bringing down unreported activity and increase government
Capital controls discourage the

repatriation of Greek firms income
from their activities abroad
revenue and, at the same time, push forward with the timely lifting
of capital controls in the following the quarters, i.e., to maximize the
_______________________________________________
economic benefits of the transition to a less-cash dependent and

more transparent transaction environment and duly reverse the costs
Balance of payments: Primary

income receipts (y-o-y)
outflow of private funds of 5.3 bn in July-November 2015, despite
-20
-20
the capital controls.
-40
-40
-60
-60
Q3:2013
Q3:2015
Q2:2015
20
Q1:2015
20
Q4:2014
40
Q3:2014
themselves, mainly through the sharp decline in private capital
40
Q2:2014
60
Q1:2014
of capital controls. In fact, the latter have started to manifest
60
y-o-y
Q4:2013
80
80
under the programme, capital controls appear to hinder not only the
repatriation of funds held abroad, but also the rapid return of
and this is particularly evident in

the shipping sector
_______________________________________________
deposits to the banking system from the liquidity hoarded by the

private sector domestically in the form of euro notes. Greek
businesses are clearly avoiding repatriating their incomes, dealing
directly with their customers and suppliers abroad. Indeed, shipping
Transportation revenue
& composite freight prices
y-o-y
In this vein, while bank deposits have been broadly stable since
August, adjusting for seasonal effects and financing disbursements
Compensation of employees
Direct investment
Other investment
90
inflows to the economy. The economy continued to face a net
revenue (Balance of Payments data) declined by 49.3% y-o-y (-2.8

90
bn) in July-November compared with a 29.6% decline in composite
70
50
50
freight rates (dry bulkers & tankers). Albeit difficult to quantify in the
30
30
10
10
near term, a continuation of this liquidity squeeze in 2016 could
-10
-10
weigh on investment and exporting activity, which is expected to play
-30
-30
-50
-50
a key role in the economic turnaround in our baseline scenario.
-70
-70
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
70
Accordingly, a material lifting of capital controls during 2016 is critical

to the recovery in FY:2016.
Transportation revenue, net

Transportation revenue, gross
Freight prices (dry&tankers)
Appendix
Da
GREECE
Macro View - Economic Outlook | February 2016
Recessionary headwinds significantly milder than anticipated in

H2:2015 -- latest readings of conjunctural indicators suggest
that downside risks remain limited
Latest indicators suggest
GREECE | NBG Macro View | February 2016
NATIONAL BANK OF GREECE | Greece: Macro View |February 2016
51
Aug-15
48,7 47,5 47,3 49,2 49,6 51,2 51,3 49,7 51,1
-4,2
0,2
-0,5
3,1
-0,8
-1,5
2,4
-2,0
5,5 0,5 -0,8 4,7
-6,1
-6,6
-1,4
-2,8
0,5
-3,9
-3,2
0,3
-5,2
0,1 -4,7 -4,3 0,0
Services confidence (index level)
-22,7 -13,1 -2,5
-4,6
-7
-9,7
-7,1
-8,1
-4,9
2,5
4,5
4,9
6,5
18,4 19,7 22,3 14,8 15,8 21,6 15,3
Consumer confidence (index level)
-71,8 -63,4 -66,5 -70,9 -76,6 -72,2 -66,2 -66,7 -63,3 -62,7 -63,1 -58 -52,6 -50,5 -47,7 -48 -54 -56 -50,9 -49,9 -53,9 -49,3 -30,6 -31 -40,5 -43,6 -46,8 -52,9 -64,8 -64,2 -59,6 -64,1 -61,1 -63,9
Retail confidence (index level)
-26,7 -15,2 -19,1 -21 -21,3 -22,5 -22,8 -18,1 -15 -11,6 -8,4
-10
-9,7 -7,4
2,5
4,8 6,6 -2,5 5,0
10,3
Retail trade volume (yoy)
-14
-2
-8
-14
-8
-5
-1
-6
-3,0
-2,9
-3,4
5,0
-6,1
1,7
1,5 3,2 0,0
-1,3 -1,4
Construction Permits (yoy)
-16
-51
-15
-4
-30
-37
89
-44
-41
-5
-8
10
53
-24 -5,3 7,2 -2,8 -36,4 13,1 12,2 36,6 35,6 -3,5
6,1 -15,1 -25,2 -28,5 -13,1 -38,2
House prices (yoy, quarterly series)
-12
-12
-12
-10
-10
-10
-10
-10
-10
-9
-9
-9
-8
-8
-8
-7
-5
Construction confidence (index level)
-39
-35
-34
-32
-30
-18
-37
-33
-39
-23
-23
-14
-20
-20
-19
-20 -21 -33 -21,2 -34,2 -16,6 -29,8 -31,9 -40,0 -41,9 -44,5 -48,0 -62,5 -67,5 -52,8 -49,4 -47,0 -49,1 -37,9
Employment (y-o-y)
-6,0
-5,5
-4,6
-4,3
-3,5
-2,9
-3,1
-2,8
-2,7
-1,2
-0,8
-0,3
-0,6
0,4
1,0
1,7 1,0 1,3
1,3
1,6
1,5
1,1
1,5
-0,2
2,2
2,9
1,6
1,8
2,3
2,3
2,4
Interest rate on new private sector loans (CPI deflated)
6,3
6,0
5,9
6,2
6,8
6,7
7,6
8,4
6,8
7,1
6,5
6,8
7,2
7,4
6,3
6,1 5,6 6,0
7,0
6,4
7,6
7,9
7,1
7,1
7,0
7,1
6,9
7,0
6,3
6,5
6,0
Credit to private sector (y-o-y)
-6,8
-7,4
-6,8
-5,1
-4,8
-4,7
-4,8
-4,7
-4,3
-3,5
-3,7
-5,5
-4,9 -4,4
-4,0 -3,9 -3,7 -3,7 -3,2 -3,0 -2,7 -1,6 -1,5 -1,2 -1,6 -2,8 -2,9 -3,3 -3,7 -3,6 -3,6 -3,7 -3,6
Private sector deposits (y-o-y)
-3,9
1,6
4,9
2,4
2,5
1,7
0,5
0,4
-1,5
-2,4
-3,9
-3,0
-1,5 -2,1
0,3
0,7 1,4 2,2
2,6
2,1
-1,7 -7,2 -11,2 -12,9 -16,3 -18,6 -25,4 -26,3 -26,6 -26,3 -26,5 -28,3 -25,3
Interest rate on new time deposits (households, CPI deflated)
4,8
4,5
4,3
4,2
4,6
4,2
5,0
5,7
4,5
4,3
3,9
4,2
4,1
4,5
3,5
3,0 2,4 2,9
3,6
3,1
4,4
4,6
4,0
4,0
3,9
4,0
4,0
3,5
2,7
2,9
2,0
1,7
1,2
Economic sentiment index (EU Commision, NBG weights, Greece)
63
73
73
69
64
67
72
72
75
78
78
83
87
89
96
96
92
95
90
91
105
103
93
89
87
76
62
71
75
71
73
Economic sentiment index (EU Commision, Euro area)
89
90
92
93
96
97
98
99 100,3 100,9 101,1 102,5 102,4 103 102,4 103 101 100 100,9 100,8 100,9 101,5 102,3 103,9 103,8 103,8 103,4 103,9 104 105,5 106,1 106 106,7 105
Exports (other (excl.oil&shipping) y-o-y 6m mov.avg
26,2 29,0 30,4 33,3 29,3 30,5 25,2 25,5 20,4 13,4 10,9
Imports (other (excl.oil&shipping) y-o-y 6m mov.avg
17
NBG Composite Index of cyclical conditions
22
31
36
32
35
33
-17,8 -17,1 -9,31 -16,9 -13,7 -7,01 -12,1
Color map scale
Rapid contraction
92
88
-7,9 -9,2 -10,2 -15
-13 -14,1 -26,4 -30,2 -23,3 -19,6 -16,6 -13,6 -10,1
7,0
4,1
2,4
4,8
8,0
3,7
-2,9 -3,7 -5,9
3,6
2,7
-1,2
1,6
3,3
3,3
-2,7 -0,7
1,6
4,7
0,6
-4,3 -4,7 -1,7
4,1
2,9
-1,9
2,0
5,2
5,3
6,1
7,9
10,1 12,4 12,3 12,7 12,8 11,6
-6
4,7
-6
5,3
7,9
8,9
-1,0 -3,9 -4,1 -0,6
0,2
-3,5 -25,9 -31,0 -20,0 -15,3 -12,8 -5,3 -3,4
0,6
4,1
-0,4 -7,2 -2,1 -3,3 -2,4 -4,5
-4
-1,7
1,0
-4
-4
-1,8
-5
-5
-6
-6
-6
5,9
0,4
-1,6
2,6
1,9
3,9
3,9
5,5
7,9
9,6
9,7
10,2
9,4
7,8
5,0
2,2
1,3
16
10
10
10
-1
-5
-6
-8
-3,97 -0,8
-1,2
-0,2
0,5
1,3
2,2
2,4 3,5 3,9
4,5
0,2
10
11
12
13
17
18
Moderate contraction
Slow contraction
14
Stabilization
15
16
Slow expansion
-2,8 -6,5 -1,5 -2,5 -4,8 -9,5 -14,8 -18,9 -25,3 -26,5 -28,0
19
20
21
22
23
24
Moderate expansion
25
26
27
Rapid expansion
Sources: NBG, BoG, ELSTAT, EU Commission, IOBE
Greece: Growth Outlook

2014
GDP (% yoy, s .a.)
GDP (% q-o-q, s .a. )
Domestic Demand (y-o-y)
Final Consumption (y-o-y)
Private Consumption (y-o-y)
Fixed Capital Formation (y-o-y)
Residential construction
Total GFCF excluding residential
Inventories * (contri bution to GDP)

Net exports (contri bution to GDP)
Exports (y-o-y)
Imports (y-o-y)
2015f 2016f
5,7
24
37
-2,2 -0,6 -0,7 0,1
-6
Feb-15
Dec-13
Oct-14
-7
-3
27
37
-9
-7
2,1
2014
2015f
Q3
Q4
Q1
Q2
Q3
Jan-16
-4,9
-3,2
Dec-15
-2,6
-5,5
Oct-15
-4,3
-7,2
Nov-15
-4,7
2,3
Sep-15
5,7
-4,4
Jul-15
-2,1
1,0
Apr-15
2,9
Industrial production (yoy)
Mar-15
Manufacturing production (yoy)
Jan-15
1,3
Dec-14
1,5 0,3 -5,4 -0,6
Nov-14
1,3
Sep-14
-8,9 -4,9
Ju-14
-4,1
Mar-14
-11 -10,6 -11,2 -7,1
Jan-14
-9,9
Feb-14
46,9 30,2 39,1 43,3 47,3 48,1 50,2
-8,8 -10,6 -10,7 -5,3
Oct-13
48
-11,1 -6,7
Nov-13
49,4 48,7 50,1 48,4 48,8 49,1 49,4 48,3 48,4 48,9 46,5
Industrial confidence (index level)
PMI (index level)
Sep-13
Jun-15
Apr-14
May-14
47
May-15
Jul-13
Aug-13
45,3 45,4
Aug-14
Jun-13
45
Jun-14
Apr-13
May-13
Greece: Tracking the economys cyclical position
2016f
Q4f
Q1f
Q2f
Q3f
Q4f
0,7
1,0
0,0
0,7
-2,6
-0,3
-1,3
0,2
0,5
-5,2
-0,2
0,3
-0,5
-1,8
6,0
1,2
1,2
0,4
-0,5
0,7
2,0
1,0
-0,5
2,8
-0,7
0,8
4,8
0,4
0,0
2,3
0,3
0,7
10,1
0,9
0,3
-0,6
1,2
1,8
-0,5
-1,1 -1,5 -1,8

-0,9 -0,9 -0,3
-4,0 -2,9 -3,3
0,1
-1,1 -2,0
0,3
-1,0 -1,7
-12,9 -15,6 -11,6
-1,6
0,8
1,7
0,5
1,5
0,0
-2,6
-2,0
-1,9
-9,5
3,1
0,5
0,3
22,0
4,3
1,7
1,5
27,0
-52,3
8,9
-24,1
-3,3
-8,0
7,1
-44,4
11,4
-52,2
15,6
-30,4
15,5
-8,3
0,2
-34,3
-10,7
-20,0
-15,3
-13,1
-11,5
-9,8
-9,5
-5,9
24,1
-3,1
29,2
1,3
-0,3
7,4
7,8
-0,9
1,0
-3,9
-6,7
0,1
-0,6
2,2
3,9
0,6
0,8
9,4
6,0
2,9
-1,9
10,3
16,2
0,9
-1,9
3,2
9,3
-1,7
1,6
1,4
-3,5
-2,6 -0,1
3,0
1,5
-11,4 -8,0
-19,9 -11,7
-0,2
1,6
-1,8
-6,5
0,2
1,0
-0,8
-4,0
0,3
-2,3
6,5
15,5
0,0
-2,7
5,3
14,0
*also including
other
discrepancies
Source:
EL.STAT.
andstatistical
NBG Research
Estimates
5,3
75

Economic activity declined in Q3:2015 for the first time
since Q4:2013 (-1.1% y-o-y), albeit significantly less than
anticipated (-5.0% y-o-y implied by official forecasts made
in August)
Private consumption was resilient, inter alia, reflecting a

contraction of the shadow economy on the back of a strong
increase in cashless transactions
Composition of output growth by

expenditure component
contributions in
pps
7
4
2015:Q3
2015:Q1
2014:Q3
2014:Q1
2013:Q3
2013:Q1
2012:Q3
2012:Q1
2011:Q3
2011:Q1
2010:Q3
2010:Q1
1
-2
-5
-8
-11
-14
Consumption
Net Exports
Investment
Inventories
Growth
Imports declined sharply (-20% y-o-y), reflecting the fall in

investment (-12.9% y-o-y), inventory depletion (-2.5% of
quarterly GDP in Q3:2015), and a shift to domestic
consumption
40
Fixed investment (excluding

residential construction) &
imports of goods
y-o-y
Strong tourism activity (annual increase in revenue of +5.2%

y-o-y in Q3:2015) and a further decline in oil prices (-35.8%,
y-o-y, in euro terms) provided valuable support to GDP in
this challenging juncture
Brent crude oil, domestic energy
prices and gross tourism revenue
40
19
y-o-y
14
20
20
-1
-20
-40
-40
Q4:2005
Q3:2006
Q2:2007
Q1:2008
Q4:2008
Q3:2009
Q2:2010
Q1:2011
Q4:2011
Q3:2012
Q2:2013
Q1:2014
Q4:2014
Q3:2015
-20
-6
-11
-16
y-o-y,
4q m.a.
2015:Q4
2015:Q2
2014:Q4
2014:Q2
2013:Q4
2013:Q2
2012:Q4
2012:Q2
2011:Q4
2011:Q2
Imports of goods (y-o-y change)
2010:Q4
2010:Q2
-21
50
40
30
20
10
0
-10
-20
-30
-40
-50
Tourism revenue (y-o-y, 4q m.a., left axis)

Brent crude oil (y-o-y, euro/barrel, right axis)
Energy prices (y-o-y, right axis)
Fixed capital investment excl. residential

construction (y-o-y change)
Activity in Q4:2015 and early-2016 should continue to

recover, as business confidence is improving and
economic sentiment approaches stabilization territory
Business, services and consumer

confidence indicators
Greece, GDP growth and economic

sentiment
20
-25
-35
10
-45
0
-10
-20
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
-50
Industrial confidence (left axis)

Services confidence (left axis)
Consumer confidence (right axis)
130
y-o-y
index
120
110
100
-55
-65
-4
-75
-8
70
-85
-12
60
-30
-40
12
90
80
2003:Q4
2004:Q4
2005:Q4
2006:Q4
2007:Q4
2008:Q4
2009:Q4
2010:Q4
2011:Q4
2012:Q4
2013:Q4
2014:Q4
2015:Q4
30
GDP growth (left axis)

Economic sentiment, EU Commission (right axis)

Retail sales volumes (excl. fuels) declined by -2.0% y-o-y in
October-November (from -2.7% y-o-y in Q3), supported by
increasing sales of food-beverages and clothing-footwear,
of +1.0% y-o-y and +6.0% y-o-y, respectively
Retail sales and consumer
confidence
Manufacturing production increased in NovemberDecember (+2.4% y-o-y, on average), supported by higher

production in the beverages, chemicals, food and oilrefining sectors
-5
10
-20
-35
y-o-y
in pps
index
-50
-5
-2
-65
-10
-1
-80
-20
-95
-2
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
-15
-7
Basic metals (in pps, left axis)

Beverages (in pps, left axis)
Chemicals (in pps, left axis)
Manufacturing production (y-o-y, right axis)
Retail sales, volume, y-o-y (left axis)

Consumer confidence, index (right axis)
Manufacturing PMI crossed the 50 threshold in December,

for the first time in 16 months, and capacity utilization
recovered in Q4:2015 -- driven by export-oriented sectors -indicating a sustainable improvement in industrial activity
PMI & Capacity utilization
Construction activity shows signs of recovery, supported

by an acceleration in public investment activity (increase
in PIP disbursement of +43.7% y-o-y in Q4:2015)
Public investment program (PIP)
disbursements and construction
confidence
74
72
70
-10
130
68
Jan-16
-120
Aug-15
58
Oct-14
-24
-70
-70
Mar-15
60
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
-19
-20
May-14
62
Jul-13
-14
30
-50
Dec-13
64
80
Feb-13
66
-9
-30
Sep-12
-4
Apr-12
11
y-o-y
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
15
Key sectoral contributions in

industrial production growth
Construction Confidence (left axis)
PMI, deviat. from 50 (left axis)

PIP Disbursements (y-o-y change, 3m moving
average, right axis)
Capacity utilization (right axis)
Downside pressures on house prices increased in Q3:2015

(-6.1% y-o-y vs -5.0% in Q2:2015), as did the fall in
commercial real estate prices (-4.7% in H1:2015), as tax and
liquidity factors amplify pressures from the still high supply
overhang
Employment showed remarkable resilience, reflecting the

cost adjustments achieved during the past several years,
expanding by 2.1% y-o-y in Q3:2015 and +2.4% y-o-y in
October and the unemployment rate declined to a 3-year
low of 24.5% in October
House & commercial prices
Labor market
10
y-o-y
10
9
0
-5
%
y-o-y
28
24
20
-5
16
-3
12
-6
-10
-15
-15
-9
-20
-12
H2:2007
H1:2008
H2:2008
H1:2009
H2:2009
H1:2010
H2:2010
H1:2011
H2:2011
H1:2012
H2:2012
H1:2013
H2:2013
H1:2014
H2:2014
H1:2015
Q3:2015
-20
House prices (total, y-o-y)

Office prices (Athens, y-o-y)
Retail prices (Athens, y-o-y)
Q1:2009
Q3:2009
Q1:2010
Q3:2010
Q1:2011
Q3:2011
Q1:2012
Q3:2012
Q1:2013
Q3:2013
Q1:2014
Q3:2014
Q1:2015
Q3:2015
-10
Employment growth (left axis)

Wage earners (left axis)
Unemployment rate (right axis)
The improved flexibility of the labor market and secondary

effects of tourism supported employment in key sectors
such as retail-wholesale trade and manufacturing (+7.3%
y-o-y and +9.9% y-o-y, respectively, in Q3:2015), with wage
earners accounting for nearly 100% of new jobs
Healthy growth in tourism revenue (+5.9% y-o-y in

11M:2015), combined with declining imports (-14.3% y-o-y
in 11M:2015), pave the way for a balanced position in the
current account
Employment trends per

employment category
Goods exports & tourism revenue
20
2
0
20
15
15
10
10
-2
-4
contribution in annual
change in
employment in pps
-5
-10
-10
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Nov-14
Feb-15
May-15
Aug-15
Nov-15
2015:Q3
2014:Q4
2014:Q1
2013:Q2
2012:Q3
2011:Q4
2011:Q1
2010:Q2
2009:Q3
2008:Q4
2008:Q1
2007:Q2
Wage earners
Self employed
Goods exports excl.oil & ships (y-o-y, 3m ma*)
Businessmen
Family employees
Tourism revenue, gross (y-o-y, 12m ma)
despite the sharp drop in export revenue from nontourism services (-47% y-o-y) and the further shrinkage in
production factor income from abroad and lower EU
transfers
Capital account
-1,9
-2,2
2,5
4,7
-0,7
0,7
0,3
0,0
0,3
-0,2
-2,1
2,8
4,9
-0,6
2,7
-0,3
0,0
0,1
3,2
-1,3
2,5
3,8
-0,6
5,2
-0,1
-0,1
0,0
0,6
-6,9
9,5
16,5
-2,2
9,6
0,2
-0,2
1,1
-1
-1
-2
-2
-3
-3
Jul-15
-2,2
-2,3
2,7
4,9
-1,0
1,4
-0,1
-0,2
0,4
%, y-o-y
11M:2015
Dec-15
2,1
-2,1
2,5
4,6
-1,1
5,4
-0,1
-0,1
0,0
Q3
Feb-15
-1,0
-2,5
2,6
5,1
-0,7
2,5
-0,3
0,0
0,2
Q2
Apr-14
0,0
-7,6
10,4
18,0
-2,4
9,9
0,2
-0,2
1,2
Q1
Sep-14
-2,1
-9,0
10,0
19,0
-3,5
10,3
0,3
-0,2
1,4
2015
Q4
Nov-13
Non-oil Trade Balance

Non-oil Exports
Non-oil Imports
Oil Balance
Services Balance
Primary Inc. Balance
Secondary Inc. Balance
Q3
Jan-13
Current Account
2014
Q2
Jun-13
2014 2015
(as % GDP)
Aug-12
Balance of Payments
The pace of deflation slowed considerably in Q4:2015

(decline in headline inflation of-0.6% y-o-y from -2.1%, in
9M:2015), and core inflation entered positive territory in
Q4:2015 (+0.3% y-o-y) for the first time in three years,
mainly due to the inflationary impact of the VAT rate
increase since July 20th 2015 (+1.9 y-o-y in Q4:2015)
CPI & HICP excluding taxes,
inlfation
4
4
Oct-11
2006:Q3
-5
*EL.STAT. data
before 2013
Mar-12
-8
-10
May-11
-6
Contribution of fuel in CPI (in percentage points,

left axis)
CPI inflation (y-o-y change, right axis)
Source: Bank of Greece
HICP excl. taxes (y-o-y change, right axis)
Credit to the private sector declined by 2.0% y-o-y in

December, with loans to households contracting by 3.1%
y-o-y (compared with a decline of total credit to private
sector of 1.7% y-o-y in June 2015)
Corporate credit declined by 1.2% y-o-y in December 2015

compared with -0.7% y-o-y in June 2015, with a further
contraction in lending to shipping and construction sectors
outweighing the increase in loans to industry (+2.4% y-o-y)
Bank lending to private sector
Bank credit to export-oriented

sectors
9%
y-o-y change
32
32
22
22
9%
y-o-y
6%
6%
3%
3%
0%
0%
Dec-15
Jun-15
Sep-15
Q4:2015
Q4:2014
Q4:2013
Q4:2012
Q4:2011
Q4:2010
Q4:2009
Q4:2007
Q4:2006
Q4:2005
Q4:2008
Housing loans
Credit to private sector
Loans to enterprises
Mar-15
-12%
-8
Sep-14
-9%
-12%
-8
Dec-14
-6%
-9%
Jun-14
-6%
Dec-13
Mar-14
-3%
Jun-13
-3%
Sep-13
12
Mar-13
12
Industry
Tourism
Agriculture
Construction
Private sector deposits increased by 2.7 bn in December,

supported by a normalization in government spending and
favorable seasonal factors
The Greek banking systems financing from the Eurosystem

decreased by 5.9 bn in December, on a monthly basis, and
by 19.1 bn cumulatively since June, with the ELA
dependence declining by 8.6 bn in December, on a
monthly basis (17.9 bn lower than June)
Greek banks' borrowing from the

Eurosystem

160
140
-2
120
-4
100
-6
80
60
-8
40
Dec-15
20
ECB
International headwinds and rumors of a delayed

completion of the pending 1st programme review, pushed
Greek sovereign bond yields higher in January 2016
35
30
25
*Bloomberg and NBG Research

inperpolation/curve fitting
Greece
A pick-up in State budget revenue (excl. ANFA/SMP),

supported by new fiscal measures and a reduction of
shadow activity due to higher cashless payments
2012
2011
2010
2009
2013*
2014*
Apr-14
bn euro
Oct-15
-2
Dec-15
-2
Aug-15
Jun-15
Apr-15
Feb-15
Oct-14
Dec-14
Jun-14
*excluding SMP& ANFA revenue
3
2
1
-1
-2
-3
-4
-5
-6
-7
-8
-9
-10
Aug-14
% GDP
Portugal
General government budget trends

(modified-cash basis)
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2
1
0
-1
-2
-3
-4
-5
-6
-7
-8
-9
Spain
... in conjunction with spending management (-0.4% of GDP

below target), broadly offset the pressures on the financial
position of other government entities and the accumulation
of c. 1.6bn (0.9% of GDP) of new arrears until end-2015
Feb-14
Greece - State Budget Primary

balance
Sep-13
Feb-13
Oct-10
January 31, 2016

July 8, 2015
September 15, 2014
10
Jul-12
15y
Apr-14
10y
15
10
Dec-11
20
15
May-11
15
25
Agreement on a
new financing
programme
20
5y
Jul-15
30
25
Jan-16
35
35
Jun-15
45
Agreement
for further
relief &
buyback
PSI&2nd
MoU
Nov-14
55
3y
Dec-15
10y government bond spreads

over bund
65
6m
Feb-15
Apr-14
ELA
following a steady decline between July and December

2015 (cumulative fall in 10-year GGB yields of 520 bps)
Greek Sovereign Yield Curve*
-5
Sep-14
Nov-13
Jan-13
Aug-12
Oct-11
Non-financial corporations
Households
Jun-13
0
Dec-10
Oct-15
Nov-15
Sep-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Feb-15
Mar-15
-10
Mar-12
180
monthly flows
in bn
May-11
State budget primary balance (modified cash

basis)
Rest of Gen.Government balance (cash basis)
2015*
Greece: Dates to Watch

February
3
11
ECB Governing
Council: nonmonetary policy
meeting
Eurogroup
meeting
12
ECOFIN finance
ministers
meeting/EL.STAT.
release: Quarterly
National Accounts
(Q4:2015)
17
18-19
26
ECB Governing
meeting
European
Council meeting
Moody's credit
rating review for
Greece
March
4
10
11
16
17-18
31
EL.STAT.
release:
Annual
National
Accounts
(2015)
Eurogroup
meeting
/280mn
IMF
repayment
due
ECOFIN
finance
ministers
meeting
ECB
Governing
Council:
monetary
policy
meeting
Fitchs
credit
rating
review for
Greece
ECB
Gov.Council:
non-monetary
policy
meeting/530mn
IMF repayment
European
Council
meeting
Ending of
the 2nd MoU
with IMF
April
6
13
15-17
18
ECB Governing
meeting
430mn IMF
repayment due
IMF Spring Meeting

& World Bank
meetings
21
EL.STAT. release:
General government
deficit and debt 2015
ECB Governing
Council: monetary
policy meeting
May
4
13
ECB Governing
meeting
EL.STAT. release:
Quarterly National
Accounts (Q1:2016)
17
Eurogroup meeting
18
ECB Governing
meeting
25
ECOFIN finance
ministers meeting
June
2
ECB Governing
Council meeting
280mn IMF
repayment due
16/17
Eurogroup
meeting/ECOFIN
finance ministers
meeting
22
ECB Governing
meeting
23-24
24
European
Council meeting
Moody's credit
rating review for
Greece
Greek Economy: Selected Indicators

2014
Q1
Q2
Q3
GDP
Domestic demand
Final Consumption
Gross fixed capital formation
Exports of goods and services
Imports of goods and services
0,4
-1,0
0,9
-8,9
5,1
-0,2
0,2
1,8
0,3
-8,0
4,7
9,7
Retail sales volume (y-o-y)

Retail confidence (15-yr. average: -1,5)
Car registrations (y-o-y)
Consumer confidence (15-yr. average: -43,4)
Industrial production (y-o-y)
Manufacturing production (y-o-y)
Capacity Utilization (15-yr. average: 72,8)
Industrial confidence (15-yr. average: -6,1)
PMI Manufacturing (base=50)
Construction permits (y-o-y)
Construction confidence (15-yr. average: -21,9)
PIP Disbursements (y-o-y)
Stock of finished goods (15-yr. average: 12,2)
-3,1
-10,0
21,3
-61,3
-2,1
0,6
66,3
-7,5
50,7
-17,0
-20,0
91,7
6,7
0,1
-4,9
36,0
-50,3
-2,8
-0,4
68,5
-4,2
50,5
17,4
-19,8
11,7
3,2
Current account balance (% of GDP)

Current account balance (EUR mn)
Services balance, net (EUR mn)
Primary Income Balance, net (EUR mn)
Merchandise exports-- non-oil (y-o-y cum.)
Merchandise imports-- non-oil (y-o-y cum.)
-1,1
-1985
1625
1416
-3,0
2,7
-1,0
-1739
4462
-475
-1,3
8,9
2,1
3777
9628
-186
0,2
7,8
Unemployment rate
Employment growth (y-o-y)
27,1
-0,8
26,9
0,2
26,2
1,4
Headline inflation
Core inflation
Producer prices excl.energy
-1,3
-1,0
-0,7
-1,5
-1,2
-0,7
-0,6
-0,1
-0,6
Gov. deficit/GDP (excl banking system support&SMP/ANFA revenue)

Government debt/GDP
Revenues--Ordinary budget (cum. % change)
Expenditure--Ordinary budget (cum. % change)
4,7
-7,3
3,9
-8,2
1,0
-7,0
Total deposits
Loans to private sector (incl. sec. & bond loans)
Mortgage loans (including securitized loans)
Consumer credit (including securitized loans)
-3,4
-4,1
-3,4
-3,4
1,0
-3,5
-3,2
-2,7
10-year government bond yield

Spread between 10 year and bunds (bps)
7,5
586
6,2
473
USD/euro
1,37
1,37
2015
Q4
year
aver.
2016f
Q3
Q4
year
aver.
0,9
-0,6
1,2
-0,5
1,4
-3,5
-1,1
-4,0
0,1
-12,9
-11,4
-19,9
-1,5
-2,9
-1,1
-15,6
-8,0
-11,7
-0,3
-1,3
0,2
-5,2
-3,9
-6,7
Q3:15
Q3:15
Q3:15
Q3:15
Q3:15
Q3:15
-1,1
-4,0
0,1
-12,9
-11,4
-19,9
-0,2
0,3
-0,5
6,0
2,2
4,0
0,0
-3,0
19,2
-37,0
1,9
5,2
67,1
-9,1
48,5
29,2
-33,9
-40,9
13,0
0,6
-1,3
33,2
-43,6
-2,9
-1,0
67,0
-14,0
47,1
-5,6
-44,8
-57,6
15,0
-4,2
-25,6
-2,2
-60,6
1,6
-0,2
62,0
-26,6
37,5
-22,4
-60,9
-21,0
17,4
-11,1
2,1
-61,6
1,7
1,2
65,2
-16,6
48,5
-48,5
43,9
15,3
-10,3
13,8
-50,7
0,6
1,2
65,3
-16,6
45,4
-47,0
-2,8
15,2
Nov
Jan
Dec
Jan
Dec
Dec
Dec
Jan
Dec
Oct
Jan
Dec
Jan
-4,5
-3,4
9,0
-63,9
5,2
3,3
66,7
-10,1
50,2
-38,2
-37,9
32,6
13,4
-2,1
-3767
18273
574
1,9
7,9
-1,9
-3214
1297
557
10,0
4,6
-0,2
-388
4757
-494
5,2
-7,1
3,2
5559
9062
-104
-2,2
-19,6
0.0 est.
Q3:15
Q3:15
Q3:15
Q3:15
Q3:15
Q3:15
3,2
5559
9062
-104
-2,2
-19,6
0,5
26,6
0,6
25,9
0,8
25,0
2,2
24,8
1,8
Oct
Oct
24,5
2,4
25,2
1,2
-1,3
-0,8
-0,5
-2,4
-0,7
-0,1
-2,1
-0,9
0,2
-1,8
-0,5
0,2
-0,6
0,3
-1,7
-0,5
Dec
Dec
Nov
-0,2
0,4
-0,2
-0,2
0,5
-3,7
178,6
-3,5
-6,4
-1,8
-2,2
-5,7
-6,7
-6,7
-5,3
-0,8
0,2
-0,8
0,2
Dec
Dec
-0,8
0,2
-3,3
185,0
-14,4
-2,5
-3,3
-2,5
-26,8
-1,7
-3,4
-2,3
-27,1
-1,5
-3,5
-2,8
-24,9
-2,0
-3,5
-2,3
-24,9
-2,0
-3,5
-2,3
Dec
Dec
Dec
Dec
-24,9
-2,0
-3,5
-2,3
10,0
967
11,6
1112
10,8
1011
7,9
730
10,1
955
Dec
Dec
8,3
769
1,13
1,11
1,11
1,10
1,11
Dec
1,09
Q1
Q2
Most recent
Real sector (y-o-y period average, constant prices)
1,2
0,4
-0,5
2,0
9,4
6,0
1,0
2,8
-0,7
4,8
10,3
16,2
0,7
1,0
0,0
-2,6
7,4
7,8
0,4
2,3
0,3
10,1
3,2
9,3
Coincident and leading indicators (period average)
1,6
3,0
31,5
-52,7
-2,9
1,8
69,0
-1,2
49,1
-11,2
-24,5
29,3
4,4
-0,3
6,7
30,9
-51,6
0,1
5,3
68,8
-0,8
49,1
-15,6
-24,0
-24,2
6,4
-0,4
-1,3
30,1
-54,0
-1,9
1,8
68,2
-3,4
49,9
-6,6
-22,1
-0,9
5,2
External sector (period average)
-2,2
-3821
2558
-182
1,9
7,9
Employment
26,0
1,5
Prices (y-o-y period average)
-1,8
-0,7
-0,1
Fiscal policy
-3,5
-6,4
Monetary sector (y-o-y, end of period)
0,3
-3,5
-3,1
-2,5
-2,0
-3,1
-3,0
-2,8
-2,0
-3,1
-3,0
-2,8
Interest rates (period average)
6,0
493
8,0
719
6,9
568
Exchange rates (period average)
1,33
1,25
1,33
Sources: BoG, NSSG, MoF, ASE,NBG,Bloomberg
GREECE
Macro View
February 2016
NA TI ON A L B AN K
OF GR E E C E
This Bulletin can be viewed at: https://www.nbg.gr/en/the-group/press-office/e-spot
Editor: P. Mylonas, Deputy CEO, Head of Research, e-mail: pmylonas@nbg.gr Tel: (+30210) 3341521, FAX: (+30210) 3341702.
Main contributors to this issue (in alphabetical order): E. Alevizopoulou, A. Gouveli, N. Magginas, G. Murphy, P. Nikolitsa,
G. Theodoropoulou. This analysis is provided solely for the information of professional investors who are expected to make
their own investment decisions without undue reliance on its contents. Under no circumstances is it to be used or considered
as an offer to sell, or a solicitation of any offer to buy. Any data provided in this bulletin has been obtained from sources
believed to be reliable. Because of the possibility of error on the part of such sources, National Bank of Greece does not
guarantee the accuracy, timeliness or usefulness of any information. The National Bank of Greece and its affiliate companies
accept no liability for any direct or consequential loss arising from any use of this report.
Note: The Bulletin analysis is based on data up to February 7, 2016, unless otherwise indicated

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NATIONAL BANK OF GREECE | Greece: Macro View | July 2014

The Greek economy is proving unexpectedly resilient, overperforming

The resilience of activity, especially private consumption, does not

Cashless payments increased from 4.7% of GDP in 2014 to an estimated

NBG Research estimates that an annual increase of 10% in cashless

Cashless payments have been a key driver of economic

GDP forecasts - impact of declining shadow activity and oil prices

GDP constant prices y-o-y

contribution of declining shadow economy (in pps)

contribution of energy prices (in pps)

GDP constant prices (excl. supportive factors) y-o-y

NBG Economic Analysis Department

In view of the significance of cashless payments for supporting activity

Incentives provided by tax authorities, such as the conditioning of

Tax benefits could also be provided to entrepreneurs for accepting

Other administrative decisions, such as those lowering further the

An imminent policy challenge is to maintain the favorable momentum in

Greece: Economic & Market Analysis | January 2014| p. 2

NATIONAL BANK OF GREECE | Greece: Macro View

Increasing cashless transactions shrink the shadow

The resilience of economic activity cannot be explained by

Head of Greece Macro Analysis

(+30210) 334 1516

Effrosyni Alevizopoulou, PhD

Aikaterini Gouveli, MSc

The Greek economy is proving

The Greek economy is proving unexpectedly resilient,

GDP growth (NBG forecasts and

GDP (q-o-q, s.a., right axis)

Healthy private consumption, solid

GDP decomposition - spending

Sources:ELSTAT, EU Commission, MinFin, NBG

In this very challenging environment, Greek GDP declined by -1.1%

GREECE | NBG Macro View | February 2016| p. 3

NATIONAL BANK OF GREECE | Greece: Macro View

Private consumption has proved

Gross Fixed Capital

in a very challenging environment

Private consumption and

Private consumption s.a., y-o-y growth (left axis)

Services exports fell sharply, despite

Total imports & tourism

Tourism revenue (y-o-y, 4q m.a.)

Sources:ELSTAT, BoG, , NBG estimates

GREECE | NBG Macro View | February 2016| p. 4

NATIONAL BANK OF GREECE | Greece: Macro View

Extraordinary factors appear to have

Private consumption - actual and

Actual minus fitted (y-o-y change, right axis)

Low oil prices provided a valuable

Crude oil prices and EUR/USD

EUR/USD exch. rate (left axis)

Retail sales data did not provide any

Furniture & household equipment

Sources:NBG estimates, ELSTAT, Bloomberg

The surge in cashless transactions discourages informal activity

GREECE | NBG Macro View | February 2016| p. 5

NATIONAL BANK OF GREECE | Greece: Macro View

Capital controls have greatly altered

Payment transactions per card

triggering a shift to cashless

Domestic payment transactions

from a sustainable reduction of the shadow economy -- to levels

Capital controls have greatly altered transaction habits