Stournaras: Recovery of investment grade in 2023 is possible but will not come automatically

The upgrade of the country’s credit rating to investment grade in 2023 is entirely possible but will not come automatically, points out the governor of the Bank of Greece, Giannis Stournaras.

Speaking in an interview with “Kathimerini”, Mr. Stournaras pointed out that according to the analyzes of the Bank of Greece and also based on the models of the rating agencies, the GDP growth (by 8.4% in 2021 and over 6% in 2022 , for 2023 the Central Bank predicts a slowdown in the growth rate but not a recession) and the reduction of the debt to 159% of GDP this year, justify the upgrading of the Greek economy by one level within 2023.

In addition, based on the houses’ reports, the return to primary surpluses in 2023, as is the target in the draft Budget, is considered very important, as it will be perceived as proof of consistency in the exercise of prudent economic policy. “Overall, as long as the prudent economic policy continues in 2023, the upgrade to the investment category is entirely possible, despite the growing uncertainties of the international environment,” he said.

In any case, however, he said that the uncertainties caused by high inflation and the deterioration of economic activity in the global economy are taken into account by credit rating agencies. Due to these uncertainties, there is a worsening of financial conditions internationally, with the consequence, among other things, that more downgrades than upgrades are expected internationally for 2023.

Regarding the problem of bad loans, Mr. Stournaras predicted that due to the rise in interest rates and the slowdown in economic growth, “pressures” are expected to be exerted on the financial situation of vulnerable businesses and households, especially those that were on the path to recovery from the pandemic and of those with floating rate loans. In light of this, according to him, it is “extremely possible in the short term the creation of new red loans, but these cannot be precisely quantified at the moment”.

According to its baseline scenario, the BoE considers that any impact will be manageable, provided that banks work out and implement sustainable solutions that will provide a way out for vulnerable borrowers. Of course, these solutions must satisfy more specific supervisory conditions.

Asked about the possibility of a dividend payment by the Banks in 2023, the head of the Bank of Greece recommended prudence in the distribution of dividends. As he explained, today Greek banks have clearly improved capital adequacy ratios compared to the past. However, as he underlined, comparing with the corresponding levels of the European banks but also taking into account the challenges and the uncertainty regarding the developments at a short-term level, the Bank of Greece considers that the implementation of additional capital strengthening actions (which the banks are already launching) is necessary.

Regarding the problem of the low interest rates offered by the banks on deposits, Mr. Stournaras predicted that there will be some adjustment of the interest rates on deposits in the near future, depending of course on the market conditions. With regard to the fees for electronic payments, he argued that they are, like the cost of deposits, an object of the commercial policy of each bank. He estimated that the increasing competition in this segment will lead to an adjustment of the relevant supplies.

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