Fitch Ratings announced that it has affirmed Greece’s LongTerm Foreign-Currency Issuer Default Rating (IDR) at ‘BB+’ with a Stable Outlook.
“Greece’s rating is underpinned by structural indicators, including governance scores, human development indicators and GDP per capita, that are among the highest of sub-investment grade peers,” it said in a statement, adding that these strengths are set against the legacies of the sovereign debt crisis, which include large stocks of public and external debt, as well as low medium-term growth potential and vulnerabilities in the banking sector.
Fitch has revised its GDP growth forecast to 2.3% in 2023 (from 0.9%), thanks to a positive carry-over effect (1.5pp, given a much stronger than expected performance in 4Q22) and reduced energy risks.
“We still expect household consumption to slow considerably this year, reflecting the impact of inflation and reduced credit demand. In contrast, investment growth will remain solid thanks to absorption of funds under the Recovery and Resilience Facility (RRF), while sectors such as tourism will continue to support exports,” Fitch said in its announcement.
We expect the economy to expand by 2.0-2.5% in 2024-26, driven by investment and a recovery in household consumption, it added.
“Our forecasts are underpinned by the assumption that the Greek authorities will continue to meet milestones and targets under the RRF, which is the key anchor for unlocking public and private investment over the short to medium term. Addressing demographic challenges remains an important structural challenge, with planned labour reforms crucial to lift participation rates.”
On deficit, Fitch expects continued fiscal consolidation in 2023, partly reflecting a better starting position given a lower-than-expected deficit in 2022. “We forecast the primary surplus rising to 1% of GDP (and to 2% in 2024), with short-term downside risks largely contained, given the strong revenue growth in the first few months of the year (in cash terms tax revenue increased by 12% year-on-year in January-April).”