Enterprises that survived the crisis have become fundamentally sounder
During the protracted crisis of 2008-2016, the Greek business sector shrank in terms of turnover by 28 per cent. Although the distribution of related sales did not see significant restructuring (with trade covering almost ½ compared with about 1/3 in the EU), in terms of profitability there was a clear shift towards tradable sectors – with the export-oriented services of hotels and transport covering 18 per cent of the business sectors total operating profitability in 2016 (versus 10 per cent in 2008) and manufacturing (with petroleum in the vanguard) covering 31 per cent of the operating profitability in 2016 (versus 24 per cent in 2008).
The slowdown in economic activity was reflected in the basic performance indicators of the business sector, resulting in deviation of Operating ROA (as an efficiency measure) by 3 percentage points from the EU in 2016 (versus a more balanced state before the crisis). However, this picture tends to conceal the improved efficiency achieved by Greek businesses during the crisis (which is not yet evident due to the squeeze in domestic demand). More specifically, gross profit margin has significantly improved (being slightly better that the European average), while the rate of turnover sold on credit has declined significantly (gradually approaching European standards of the trade cycle).
Despite the pressure on Greek entrepreneurship due to the crisis, there are two categories of sectors showing dynamic, which combined account for about ½ of the business sector:
- Already competitive sectors (with ROA higher than the EU average in 2016), covering 13 per cent of the business sector and mainly concerning oil, plastics manufacturing and transport services.
- A new wave of dynamic sectors which are currently under pressure but have the potential to outperform European peers (in terms of ROA) in the event that domestic demand in Greece recovers by 10 per cent (an assumption consistent with our estimates regarding GDP growth over the next three years). This segment accounts for ⅓ of the business sector and mainly concerns food, beverages, minerals (cement) as well as hotels.
Although such recovery compensates for just ⅕ of the losses in domestic sales during the crisis, it is sufficient to enable the fundamentally enhanced Greek business sector to align its performance (ROA) with the EU average (as before the crisis).