Fitch: Maintains Greece’s credit rating at ‘BB’ with positive outlook

The credit rating agency Fitch maintained Greece’s credit rating at “BB” with a positive outlook.

In a statement he says that Greece’s per capita income is much higher than the median income of ‘BB’ and ‘BBB’ rated countries and that its governance performance and human resource development indicators are among the highest among non-investment grade countries.

These strong figures are weighed against the remnants of Greece’s sovereign debt crisis, in particular the large volume of public and external debt and the still high, though rapidly declining, level of non-performing loans, explains.

The positive outlook of the assessment reflects the expected reduction in public sector debt, amidst the still low average cost of borrowing, as well as the expected resilience of the Greek economy to some extent despite the deterioration of the Eurozone’s economic outlook in recent months.

For public debt, it foresees a steady reduction as a percentage of GDP, more specifically to 175.4% at the end of 2022 – lower than the pre-pandemic level and from 193.3% at the end of 2021 – while further a decrease is expected in 2023 and 2024, to 174.4% and 170.4% respectively. It notes, however, that in 2024 Greece’s debt will be among the highest among the countries it assesses and will be more than three times higher than the median debt of countries rated ‘BB’.

It says there are factors supporting debt sustainability, such as strong cash reserves projected to approach 17% of GDP by the end of the year and low servicing costs.

Eurostat’s proposed inclusion in the general government debt of the guarantees granted by the Greek government to the banks, under the “Heracles” programme, would increase its current level by €13.8 billion or 8.8% of GDP in 2022.

For the budget, Fitch forecasts a primary deficit of 2.2% of GDP this year and 0.9% in 2023 with a deficit of 3.5% and 2.4% respectively, due to the weaker macroeconomic environment and the government’s support measures for easing the impact of high energy prices, which will amount to €4.5 billion and €3.2 billion respectively.

The growth rate is forecast, according to the house, to reach 5.5% this year, with economic activity stagnating in the first half of 2023 before recovering in the second half. Due to the weak comparison with this year’s figures (“carry over”), Fitch predicts that the growth rate will be marginally negative in 2023 (-0.2%), while in 2024 it estimates that the recovery will consolidate and forecasts an annual growth of 1 .8%.

For inflation, based on the harmonized index of consumer prices, Fitch expects it to reach 9.8% on average this year, fall to 4.5% in 2023 and record a sharp decline in 2024.

RES-EMP

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