Greece’s debt stock will remain very high for a long time, but debt sustainability is underpinned by several mitigating factors, Fitch Ratings said in a new report on Monday.
Greece’s general government debt to GDP rose to 207% of GDP at end-2020 from 181% in 2019 as a result of the severe shock to the country’s public finances caused by the pandemic. The credit rating agency said it expects the debt ratio to remain at that level this year before declining to 193% by 2022.
The structure of Greece’s public debt, with a very high concessional share, means that debt-servicing costs are low.
“We forecast interest payments-to-revenue ratios over the next two years to be among the lowest of the ‘BB’ rating category. We project that gross financing needs (GFN) will peak in 2022/2023 and then remain below 15% of GDP on a 10-year horizon. An alternative scenario with higher primary deficits would point to an increasing GFN/GDP ratio over time,” Fitch stated.
It also noted that looser fiscal policy through persistent primary deficits presents the greatest risk among its alternative scenarios. In March, the Greek state repaid around 65% of its outstanding IMF loans.