The impact of Covid-19 on Financial Markets and New Opportunities in Greece

On March 11, 2020, the World Health Organization defined the Covid-19 epidemic as a global epidemic, with about 200,000 infected worldwide, including about 81,000 in China. Since the crisis unfolded, these numbers have grown to hundreds of thousands and even millions in countries around the world, and fears of a global and local economic recession have led to a financial crisis. Expectations of the crisis peaked in mid-March, with sharp declines in financial markets, which reached alarming rates in value. At the macroeconomic level, many countries have suffered an impact on GDP and employment rates, as a result of imposing restrictions on economic activity and as a result of allocating economic resources to contain the epidemic. Rising debt levels in the country and the debt-to-GDP ratio have raised fears of a global recession, with the US economy expected to contract by 14% in the second quarter of 2020, 8% in the third quarter and beyond 4% growth in the fourth quarter only. The forecasts for the European market are similar; After shrinking by about 22% in the second quarter of 2020, the European market is expected to return to growth of only about 3.5% by the end of the year.

In order to boost the economy, the world’s central banks have responded by injecting generous aid packages, such as the US Fed, which announced in March 2020 an injecting $ 1.3 trillion, and a reduction in interest rates. The Bank of England (BOJ) and the European Central Bank (ECB) have announced plans to buy hundreds of millions of euros worth of bonds each month. In order to inject cash into the economies, these measures, designed primarily to alleviate the debt side of the money market, in parallel with the price declines in the asset markets, have created interesting opportunities for investors.

Indeed, high volatility in the market for tradable assets adversely affects investment portfolios and especially in the current crisis, has affected those with a high marketability rate. This situation increases the attractiveness of real estate and infrastructure assets in the eyes of investors looking to add stability to their investment portfolio and long-term cash flow. As a result, and along-side improved debt-raising conditions as a result of measures taken by countries, many investors are looking at the development of the world’s commercial real estate markets. Nevertheless, the significant changes brought about by the corona crisis in relation to human daily habits, such as maintaining social distance, avoiding crowded and dense spaces and increasing the proportion of employees working from home, reflect to us that the commercial real estate sector is expected to change significantly in the near future.

In light of this, recommended investments in commercial real estate in the foreseeable future are those that address the expectation in the near future that changes in human behavior and customer preferences will continue to develop beyond the current crisis period. In the field of tourism for example, such investments should take into account the preference of tourists to stay in more isolated and less mass accommodations; Preference for private villas over luxury hotels and clubs. Moreover, for the global investor, forward-looking investment will prefer to focus on countries that have learned to deal with the corona crisis by taking decisive and unequivocal steps at an early stage. Countries like Greece, which responded early to the first signs of a global epidemic and implemented measures of social isolation and early lockdown, while pouring some € 14 billion into economic aid programs, successfully halted the first wave of the epidemic and reduced its negative impact on society and the economy. Greece and other countries similar to it in the response policy to the crisis are expected to be in the future as well, the countries that will respond appropriately and timely to the secondary outbreaks and subsequent waves.

Indeed, thanks to Greece’s successful response to the first wave of the Covid-19 epidemic, as of September 2020, only about 11,000 corona cases and less than 300 deaths had been recorded. As a result, the Mediterranean country has won much praise from world leaders, and was even one of the first countries to open its skies to tourists. The global tourism industry was one of the most severely affected industries as a result of the Corona crisis, and despite the fact that tourism is the most significant industry in the Greek economy, the rate of domestic product injury (9.7%) so far was much smaller than the contraction in the entire European economy. Most recently, the Greek government’s high level of trust from the global investor community has led to the unprecedented success of the issuance of the new series of Greek government Ten-Year Bonds, at an interest rate of 1.2%. In addition, the Greek Ministry of Tourism has launched a campaign to encourage incoming tourism, emphasizing that Greece has positioned itself as one of the best countries to face the challenges of the current crisis, in a message of “health first”, making it clear to tourists that Greece is the safest country to vacation. Investment in tourism as part of tackling the Corona crisis has borne successful fruit as we can see in the incoming tourism data in July-August 2021 – Greece has been ranked first in number of international visitors out of the top 20 European tourism destinations (compared to 2019 data).

Greece is one of the few countries in the eurozone that has returned to its GDP as it was before the Corona in the second quarter of 2021, similar to the US and probably half a year ahead of the average rate of return to GDP compared to other eurozone countries. While private consumption in Greece remains moderate, there has been a significant increase in flexible investment and public consumption. Despite some problems re-emerging in the fourth wave of the epidemic – the Delta Wave, high data on hotel bookings and flights to Greece are being recorded and these figures point to growth in Greece also in the third quarter of 2021.

In response to the higher-than-expected growth, the Greek Prime Minister announced tax cuts worth 1.9% of GDP for 2021 and 2022. Tax cuts may boost supply and demand at the same time.

Thus, against the background of determined and responsible steps taken by Greece to curb the epidemic and encourage the local economy with an emphasis on the inbound tourism sector, one can understand the marked increase recorded in June and July, at high rates, in search of cash-yielding real estate in Greece. Combining the ability to raise cheap debt along with rising demand for post-Corona-adapted Greek tourism properties, create unique and attractive investment opportunities in Greek tourism hubs, Athens and Crete.