The international credit rating agency Fitch Ratings upgraded the Greek economy from BB to BB+, with a stable outlook, bringing Greece just one grade below investment grade. Explaining its decision, Fitch says, among other things, that it now expects better deficit and debt performance in 2022-2024 due to higher growth, better budget execution, and a favorable debt service profile.
The house now forecasts a further reduction in the general government deficit to 1.8% of GDP in 2024, from an estimated 3.8% in 2022. This means an improvement in the primary balance by 2.5 percentage points, to a surplus of 0.9% in 2024 (and zero levels in 2023).
The agency, however, does not fail to emphasise that there is some uncertainty about the fiscal policies after the upcoming elections but observes that the risks are mitigated, due to the broad consensus and the good “history” of Greece in fiscal discipline.
It also notes that “the authorities continue to make progress on their reform agenda, which is linked in part to milestones in the Recovery and Resilience Fund, which, combined with the final absorption year of the NSRF 2014-2020 resources, will provide a strong investment boost”.
For inflation, Fitch expects a steady slowdown from 9.3% last year to 5% this year and 1.5% in 2024, in line with lower energy and other raw material prices as well as base effects. Core inflation is also expected to decline, albeit at a more limited pace.
On wages, it notes that in the third quarter of 2022, they increased by 7.3% year-on-year for the entire economy, the highest rate since 2010, while job vacancies from the first quarter to the third quarter of 2022 were the most in a decade.
Commenting on the upgrade of the Greek economy, the Minister of Finance, Christos Staikouras, made the following statement:
“Fitch Ratings today upgraded Greece’s credit rating by one notch. Thus it becomes the fifth rating agency, and the third among those eligible by the European Central Bank, which places the country just one “step” before the investment grade. This is the 12th upgrade of the Greek economy in the last 3.5 years, despite successive external crises.
The above positive development is yet another fruit – and, at the same time, certification – of the responsible, economically efficient, and socially just economic policy of the Government, the insightful issuance strategy, the maintenance of cash reserves at safe levels, the implementation of structural changes, the improvement of composition of the GDP through the significant increase in investments and exports, the drastic reduction of “red” loans in the banks’ portfolios, the reduction of unemployment and the forward-looking utilization of European resources, primarily from the Recovery and Resilience Fund.
The upgrade also confirms that the national goal of reaching investment grade by 2023 – with multiple benefits for society and the economy – is achievable.”
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