Prospects of the ICT sector in Greece

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Study of the ICT sector in Greece: Current Situation and Future Trends Deliverable 14: Prospects of the ICT sector in Greece-policy implications On the basis of the latest predictions and recent estimations made by international organizations and the Ministry of Finance, the Greek Economy will keep on growing at rapid rates (3.8% or even more) during 2006 and 2007. This result is due to the strong domestic demand, a strong increase of investments and the sustainable high rates of private consumption. Concerning the foreign sector, exports are increasing at a higher rate in comparison to 2005, whereas imports upturn significantly after their decrease in 2005. This drift creates an environment of broad domestic demand for the whole range of products, including the ICTs products. 3.2.1. The economic climate These favourable conditions converge with the improvement of the economic climate of 2006, which results on the basis of the Business & Consumer Surveys of IOBE (Foundation for Economic and Industrial Research). In general, the behaviour of the Business Climate Index (especially in Greece) follows the electoral cycle. Therefore, as long as the elections of 2004 were approaching the significant improvement of the expectations pushed the index high. At the same time, conducting the Olympic Games was a unique and huge event that characterized intensively the previous months. However, immediately after the Olympic Games and despite the fact that the Greek Economy sustained its high growth rates, a climate of reduced expectations prevailed. The deterioration of the climate could be interpreted as an expected turn of the Pre-Olympic euphoria, which had fed high expectations, that could not be satisfied in the short term. The fiscal adjustments that were implemented, which showed that problems were more acute and required urgent changes, contributed to this turn. Thus, the Economic Climate Index in Greece was at a continuous drop since mid 2004, which was intensified in 2005. However, the climate started to ameliorate at the end of 2005. These trends were empowered during the first months of 2006, while they were further intensified during the months that followed. Thus, the Index presents henceforth an ascendant course and reached its highest level during the last couple of years in September. The improvement of the economic climate is mainly attributed to the optimistic business expectations. On the contrary, consumers are not optimistic, as their estimations remain intensely negative. The improvement of the climate involves all sectors of the economy. In Industry, the improvement stems from the estimated increase of demand, while the predictions for the following months are also optimistic. In Manufacturing, the climate is at the same pre- Olympic levels of euphoria and it is impressively improved. This improvement is intense in Retail as well, as the predictions for the firm sales are optimistic. Services show a October 2006 Observatory for the Greek IS 14
Study of the ICT sector in Greece: Current Situation and Future Trends Deliverable 14: Prospects of the ICT sector in Greece-policy implications proportional- although slighter- improvement, since a great proportion of firms has an increasing business activity 2 . Consequently, the improved economic climate in 2006 affirms for the maintenance of the economic activity in the majority of economic sectors. This implies that firms move on the right track and this facilitates the investment decision making. The fact that these investments involve at a greater extent the introduction of new technologies/ procedures in the entrepreneurial operations (investment surveys of IOBE) favours the firms of ICTs sector and the mid-term business environment. Figure 1: Economic Sentiment Indicator 120 115 110 105 100 95 90 85 80 Ιαν-02 Μαϊ-02 Σεπ-02 Ιαν-03 Μαϊ-03 Σεπ-03 Ιαν-04 Μαϊ-04 Σεπ-04 Ιαν-05 Μαϊ-05 Σεπ-05 Ιαν-06 Μαϊ-06 Σεπ-06 EE-25 Ελλάδα Μέσος όρος ΕΕ (1999-2005) Source: DG ECFIN 3.3. The economic policy 3.3.1. Directions and Changes During the last years, the basic directions of the economic policy concern: a) the effort for fiscal conformation in order to reduce the budget deficits and the public debt, b) the promotion of structural changes in crucial sectors of the economy, where accumulated problems hinder the entrepreneurial activity. Economic policy will move towards the same direction the next two years 3 . 2 In contrast to the improvement of the business climate, consumers are pessimistic. Although the last few months their beliefs about the level of unemployment and savings are ameliorated, the consumers’ predictions for their economic conditions and the country’s economic state remain pessimistic. 3 National Reform Programme, State Budget for 2007 October 2006 Observatory for the Greek IS 15
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