With geopolitical and climate pressures continuing to create a fog of uncertainty in our region, the question is how well SMEs can withstand and how they react in this environment of constant pressures. From this point of view, the Directorate of Economic Analysis of NBG, utilizing its regular field research, highlights the strong demand and also the resilience of the investment mood that characterizes SMEs. At the same time, the constantly improving financial health is a powerful tool for further realization of development dynamics, when the normalization of external conditions allows it.

The SME Confidence Index recorded a historically high performance in the first half of 2024, reaching 28 points (compared to 21 in the previous half), surpassing the best performance so far in the second half of 2019. The driving force behind the improvement in expectations was mainly expected future demand conditions (given that current demand has been maintained at the highs of the previous semester). The growth climate is confirmed by the strategic targeting of businesses, with the percentage of the sector that has expansion plans remaining at a high 60% of the sector, while only 8% of the sector has a survival issue (which is an all-time low).

Despite their positive expectations regarding demand, Greek businesses recognize that they are operating in a highly challenging environment. Based on our research, the current level of high uncertainty is fueled by a combination of parameters:

High energy and raw material costs affect 64% and 67% of the sector respectively, as (despite curbing inflationary pressures) they remain higher than pre-crisis levels in 2019. Furthermore, the reduction in Suez Canal crossings leads in delays and/or increased costs of raw materials and goods for more than half of SMEs.
Difficulty finding staff continues to rise, with 55% of the sector reporting significant pressure, compared to 51% of the sector in the second half of 2023 (and 46% of the sector in the first half of 2023).

In this environment of uncertainty, Greek SMEs seem wary of turning their positive demand expectations into enhanced growth plans. In particular, the companies that declare the preservation of the acquired assets as their main strategic priority are in the order of 1/3 of the sector, approaching the record level it had at the height of uncertainty at the start of the Ukrainian crisis. Despite their cautious attitude, however, SMEs maintain their willingness to invest at the healthy level of 50% of the sector.

The expected normalization in the external environment (relaxation of the European monetary policy, gradual retreat of the above pressures), is expected to trigger the launch of new investment projects. This is also supported by the fact that the financial health of the sector remains particularly resilient, with the percentage of companies facing severe liquidity problems remaining at historically low levels (8-9%).

The investment mood is stable at healthy levels, pending a reduction in uncertainty

Despite their positive demand expectations, Greek businesses recognize that they are operating in a highly challenging environment. Based on our research, the current level of high uncertainty is fueled by a combination of parameters:

  • High energy and raw material costs affect 64% and 67% of the sector respectively, as (despite curbing inflationary pressures) they remain higher than pre-crisis levels in 2019. In addition, the crisis in the Middle East has led to a significant reduction of Suez Canal crossings (of the order of 47%), with the result that more than half of SMEs face increased costs and longer transit times for raw materials and goods.
  • Difficulty finding staff continues to rise, with 55% of the sector reporting significant pressure, compared to 51% of the sector in the second half of 2023 (and 46% of the sector in the first half of 2023).

In this environment of uncertainty, Greek SMEs seem wary of turning their positive demand expectations into enhanced growth plans.

In particular, companies that state maintaining their legacy as their key strategic priority are in the order of 1/3 of the sector (32% of the sector, compared to 28% in the previous half), approaching the record level it had at the height of uncertainty at the start of the Ukrainian crisis (35% in the first half of 2022).

Despite their cautious attitude, however, SMEs maintain their willingness to invest at the healthy level of 50% of the sector.

The unshakable financial health of the sector is a guarantee for further investment growth

A gradual normalization in the external environment is expected in the next period to result from the relaxation cycle of the European monetary policy, which in combination with
the gradual retreat of the above pressures is expected to trigger the launch of new investment projects.

This is also supported by the fact that the financial health of the sector remains particularly resilient, with the percentage of companies facing severe liquidity problems remaining at historically low levels (8-9%).

It is noted that the adequate coverage of the financing needs of Greek SMEs is also reflected in a recent ECB survey (SAFE), where no financing gap is observed for the first time in the last 15 years.