International observers expect the Greek economy to slow down next year to a level far from the government’s 4 percent growth target. They also see Greece missing out on the European Central Bank’s bond-buying program as the country is considered unlikely to regain an investment grade credit rating. Even so, the Greek bank roadshows in London this week have shown that investors do see opportunities in the local economy and are expressing increased confidence in the country.
Capital Economics wrote in a report on Wednesday that while the end of the capital controls is positive, the weak growth in the eurozone and the less expansive fiscal policy in Greece next year will lead the economy to a slowdown, with average growth of 1.2 percent from 2020 to 2023, from the 1.5 percent that Capital Economics projects this year.
In its own report, Citigroup says it expects the economy to remain in the region of 1.5 to 2 percent (from 1.9 percent in 2018) over the next few years, as the foreign investment inflows mostly concern European Union subsidies.
The economic slowdown expected generates concerns about the course of the Greek debt, Capital Economics argues. The ratio of the debt to gross domestic product will gradually drop below 170 percent. However, as the national debt is key to the credit rating, it means Greece will remain in junk status territory for the next few years and Greek bonds will not be included in the ECB’s new round of quantitative easing (QE), even if it lasts for two years.
On the other hand, the Greek banks’ London roadshows have shown investors to be in a particularly favorable mood thanks to the progress recorded and anticipated on the front of nonperforming exposures.
Investors also showed optimism as regards Greece’s prospects, stressing the improvement in financial indexes such as business sentiment, the property market and the drop in Greek bond yields to historic lows. The lifting of the capital controls is also viewed positively as it is expected to enhance depositor confidence, help banks improve their results and revenues, and bolster economic activity.