S&P affirmed Greece’s sovereign rating at B-/B with a stable outlook. The investment house believes the Greek economy is rebalancing, as reflected in its reduced current account deficit, notable budgetary consolidation, and improved competitiveness, among other positives. However, it adds that the general government debt and the economy΄s external debt are still large.
S&P in the press release explains that the ΄B-΄ long-term rating on Greece reflects its view of the country΄s uncertain economic growth prospects, its high albeit long-dated government debt burden, and its significant external debt position. At the same time, the rating is supported by Greece΄s relatively high (although still falling) GDP per head, its significant budgetary and structural reforms, and its large conditional liquidity lines from the European Economic and Monetary Union (EMU or eurozone) and the IMF.
“We estimate real GDP will contract by about 4% in 2013 and 1% in 2014 on declining disposable income due to further job losses, falling wages, and budgetary consolidation, before recovering to grow by about 1% in 2015. Consumption has fallen because of soaring unemployment, declining wages, tax hikes, and severe budgetary contraction amid tightening credit conditions. We think investment growth will remain negative as domestic banks curtail lending and businesses deleverage, accompanied by significant credit risk in the economy” says the investment house.
(source: Capital)
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