Twelve myths and one truth about investments

Investments in Greece (foreign and domestic) have increased significantly in recent years. This performance is subject to constructive criticism. However, there are also myths that do not correspond to reality:

Myth 1: The record in attracting Foreign Direct Investment (FDI) is due to real estate.

Reality: Foreign investment set a record in 2022, and declined somewhat in 2023. This record is not only due to real estate. FDI in the remaining sectors was higher in the three years 2021-2023 – 4.4 billion euros per year on average – than in any other year in the previous 19 years.

Myth 2: Half of Foreign Direct Investments are in real estate.

Reality: In 2023 42% (not 50%) of FDI was in real estate. On average in the three years 2021-2023, investments in real estate, according to the Bank of Greece, were 30% of total FDI.

Myth 3: Foreign Direct Investments in real estate are due to golden visa.

Reality: The “property” category includes all constructions, not just residences. It includes e.g. and investment in commercial real estate. And the word “investments” covers not only buying and selling real estate, but also renovations and constructions. The data centers built by Microsoft are also an investment in real estate. Do we want these investments?

But let’s also focus on the private buying and selling of houses, in 2023 we had only 1,802 approvals of golden visa applications and 123,750 real estate transfers!

Myth 4: We are doing worse in Foreign Direct Investment than other countries.

Reality: In the 2019-2022 period for which we have data available, FDI in Greece is at a similar level to Spain and Portugal (2.5%-3% of GDP), while it is clearly higher than Italy.

Myth 5: Foreign Direct Investments do not contribute to changing the country’s production model.

Reality: Almost one in five euros that flow into Greece as FDI goes to manufacturing. Significant investments are also made in other cutting-edge sectors such as telecommunications. Even the FDI that the Bank of Greece categorizes as investments in “financial activities”, in many cases hide behind them investments in non-financial sectors, as they refer to portfolios of companies that invest in the real economy.

Myth 6: We are heading for deindustrialization.

Reality: FDI in manufacturing in the three-year period 2021-2023 cumulatively reached 3.2 billion euros, i.e. more than all the previous 19 years (2.5 billion euros) combined! Besides, in the last five years the manufacturing index in Greece has increased by 21% compared to 5% in the Eurozone and -8% in Germany. Overall, production, investments and employment in Greek industry are at their highest point in the last twenty years.

Myth 7: Investors are leaving Greece and investing abroad.

Reality: The exact opposite happens. In the period 2019-2023, 24.9 billion euros were invested in Greece by foreigners. In the same period, 8.1 billion euros were invested abroad by Greeks. The inflow-outflow balance of direct investment has been positive for each of the last five years and cumulatively amounts to a surplus of €16.9 billion. That is, in the last five years Greece has already attracted by itself an amount almost equal to the grants it receives under the RRF.

Myth 8: In Greece there is overinvestment in real estate.

Investments in Greece in the last five years have not only increased quantitatively, but also improved qualitatively.

Reality: In 2015-2018, 42% of the total investments made in our country were in real estate. In 2019-2023 this percentage dropped to 35%. In the European Union the corresponding percentage is 51%.

Myth 9: We have overdone it in housing investment.

Reality: Just 14% of the gross capital formation in Greece in 2023 was in housing. Home investment is recovering but remains low. The housing stock in our country is aging and we need huge investments in the coming years, let alone when the housing needs to be upgraded in terms of energy as well.

This is where home renovation subsidy programs come into play, such as “Save – Self Employ” but also the recent “Renovate – Rent”.

Myth 10: Real estate investments are made by foreigners.

Reality: The figures show that for every 1 euro that foreigners invest in real estate, Greeks invest more than 4.

Myth 11: Yes, we have had an increase in investments in our country in the past years, but their quality is not good.

Reality: Gross fixed capital formation has indeed increased from €90 billion in the four-year period 2016-2019 to €137 billion in 2020-2023. As a percentage of GDP it has risen from 10.7% in 2019 to 13.9% in 2023.

It is not true, however, that this increase has come mainly from real estate: With the exception of the “real estate – other construction” category, which has fallen, and the “transportation equipment” category, which has remained stable as a percentage of GDP, all other investment categories have risen as a percentage of GDP and are generally on an upward trajectory. Well, investments in Greece in the last five years have not only increased quantitatively, but also improved qualitatively.

Myth 12: Our investment gap compared to Europe is mainly in productive investments.

Reality: 70% of our investment gap compared to the EU average. it’s in real estate (and ⅔ of it in housing).

That is, in 2019 we invested 11.4 units of GDP less than the Eurozone. In 2023 the difference fell to 8.2 points. We invest more than the EU. in ICT (Information, Communication and Technology), i.e. in IT, communications and technology!

And one Truth: Greece is a champion in the European Union in terms of investment growth. Between 2019 and 2023, Greece had cumulative investment growth at constant prices of +43%, compared to +1% growth in the Eurozone average. We are the country that increases its investments faster than any other country in the EU.

Conclusion: In the decade of the crisis, our country lagged far behind in investments, with negative effects on the country’s capital stock. Since 2019, significant steps forward have been made. Of course, the goal of convergence with Europe remains, and that means many more investments. The big picture is that in the area of ​​investment as well, the country has improved a lot, and it can improve a lot more. And no, this is not due to foreign home purchases, nor the golden visa.

*Mr. Michalis Argyrou is the president of the Council of Financial Experts.

*Mr. Alexis Patelis is head of the Prime Minister’s Financial Office.