The prospects for the Greek economy have been lauded by two separate reports from Moody’s and Goldman Sachs.
Moody’s estimates that the general government debt will be falling below 150% of GDP in 2025 from 171.3% in 2022, thanks to the prospect of significantly higher nominal GDP growth in the next years.
Maintaining the focus on improving the business environment and banking sector, along with the implementation of milestones and reforms under a national recovery plan, will help support economic growth, Moody’s noted.
Greek economy recovers after the pandemic
Combined with a commitment to fiscal adjustment and an increase in primary surpluses, maintaining the current fiscal and economic policies “improves the prospects for a significant reduction in Greece’s public debt burden,” it said.
It also underlined that the Greek economy recovered strongly after the pandemic, with real GDP growing by 5.9% in 2022 and 8.4% in 2021, after a 9% decline in 2020.
The credit rating agency also notes that New Democracy’s strong results in last Sunday’s elections significantly increase the chance that it will form a government after the repeat elections to be held at the end of June.
This means that there will be continuity in fiscal and economic policy and is credit positive for Greece’s rating, it added.
Greece closes in on investment grade
In his first television interview since his party’s landslide victory in the Greek elections on May 21, Greek PM Kyriakos Mitsotakis told CNN‘s Christiane Amanpour said that his main focus is on achieving higher economic growth rates, reducing inequalities, and increasing wages.
He also underscored the significance of Greece regaining its investment grade with a strong government post-June 25 elections.
Greece is on the cusp of regaining investment grade status more than 12 years after losing that important credit rating, marking a sharp reversal for an economy that was roiled during the euro area’s sovereign debt crisis, a note from Goldman Sachs said earlier in the week.
“Greece is an exceptional economic story,” said Filippo Taddei, senior economist for Southern Europe at Goldman Sachs. In the days leading up to a general election in Greece, we spoke with Taddei about the factors driving Greece’s economic revival, whether that growth is sustainable and what it means for the country to regain investment-grade status.
“We’re looking right now at an economy that is growing almost three percentage points above what we expect the pace of growth to be in the euro area,” the leading global investment banking firm said.
“Looking ahead to 2024, we see that gap receding to something just below 2%, but that’s still an economy growing much faster than its peers. On top of that, Greece is looking at inflation coming down more quickly than its peers. So, by and large, it’s a very strong readout from Greece,” Goldman Sachs added.