2021 will be α recovery year, with liquidity pressures dropping considerably
Amid a global collapse, the Greek business sector suffered a heavy drop in turnover (-13.2% on a YoY basis in 2020) and net losses (-1% net profit margin, vs 6% net profit margin in 2019), despite the sharp cut in variable costs (10%). Against this background, 2021 is expected to be a year of gradual recovery to a new normality – with improved performance expected in the second half, following the achievement of a satisfactory level of vaccination of the population. Specifically, Greek business sector's sales are expected to increase by 8.1% in 2021, albeit remaining 6% lower than their 2019 level.
According to our "Business Sector Balance Sheet" model, the expected sales revival in our baseline scenario and the maintenance of a tight leash on operating costs, will reduce the funding gap (prior to access to funding resources) to less than half its 2020 level – €15.5 bn in 2021 vs €34.3 bn in 2020. Indeed, liquidity-squeezed firms will comprise 33% of total turnover compared with 88% in 2020.
Continued government support (based on a program of c. €5 bn, mainly in the form of employment support measures, repayable advances and corporate income tax relief measures) and banks' post moratoria solutions on amortization payments will reduce the liquidity pressure by €5.8 bn. By maximizing the use of the existing cash reserves in Greek companies, another €3.3 bn of the liquidity gap should be covered, leaving a residual of about €6.4 bn.
The use of existing credit lines with banks and new lending would cover the remaining gap of bankable enterprises (i.e €2.2 bn). This scenario suggests that access to liquidity will not be a drag on activity and employment (i.e. no second-round effects to activity from the credit channel of monetary transmission).
The hard-hit tourism sector is estimated to have the highest post-measures working capital needs of c. €1.3 bn (with the shortfall more severe in food services, reaching 18% of sales). Note that accommodation in the second half of 2021, although remaining significantly below its 2019 level (by 38%), is expected to be about 50% higher than 2020 – thus, allowing the majority of hotels to open for the high season, with estimated occupancy rates of about 45% (similar to 2020 for the 60% of open hotels).