2021 was a milestone year for the Greek economy as it largely managed to repair the damage inflicted on the country’s gross domestic product by the coronavirus pandemic.
The country also managed to maintain its constant presence in the international markets through bond issues that met with impressive demand from quality investors with record low borrowing costs, as well as retaining a high level of cash reserves despite the costly measure by the government to economically support and reassure the domestic market. It managed to continue its pursuit of a credit rating upgrade too, keeping the hope of achieving investment grade by the first half of 2023 alive.
Greek tourism outperformed even the most optimistic best-case scenarios and achieved a spectacular comeback. And all this while the banking sector made great strides toward normalization, reducing its exposure to nonperforming loans and putting itself in a position to support growth.
A decade after the financial crisis, Greece, in large part due to widespread structural reforms, has transformed itself and is now viewed as very credible in international markets, and has also become an attractive investment destination for certain sectors.
The very strong starting point provided by 2021 gives 2022 the opportunity to be the year when Greece returns to normal and pre-pandemic conditions. Using the capital provided by the Next Generation EU recovery fund as a tool and investments as a roadmap, the economy and the banks are moving forward. The maintenance of a stable political environment, the advancement of institutional reforms, the encouragement of foreign investment, and the full utilization of European Union funds offer Greece a unique opportunity. However, this does not mean that there are no challenges and dangers facing the economy.
Following the shock caused by the pandemic, Greece’s debt level is much higher than it was during the financial crisis, while the long-term growth potential of the economy remains quite low, also in part due to troubling demographic trends.
Greece will have to adjust to a new environment where the support of the European Central Bank – which in March 2020 began the pandemic emergency purchase program (PEPP) that allowed for the purchase of securities issued by the Greek government – could be more limited. Finally, in no way have we seen the end of Covid-19, which means that one of the basic risk factors remains the continued development of the pandemic, especially when it comes to new variants and their effect on the economy (particularly on the tourism sector and the banking sector’s nonperforming exposures).
Kathimerini spoke with five credit rating agencies (S&P, Moody’s, Fitch, DBRS and Scope Ratings) as well as eight of the world’s largest investment banks and commercial banks (Deutsche Bank, JP Morgan, Bank of America, HSBC, ING, Wood & Company, UniCredit and Oxford Economics), and 18 analysts and economists gave their views on the prospects of the Greek economy and banking sector.
They were asked the same questions and focused on the following: 1) Their predictions on growth, debt, shortages and tourism in 2022 and beyond, and what could be done to support Greek economic recovery; 2) What could reinforce the Greek economy’s upward trend in terms of credit rating upgrades; 3) Whether the high rate of inflation is something temporary, and to what extent it represents a threat to Greece’s economic recovery; 4) Where Greece is at a decade after the financial crisis and the bailouts. 5) How close the Greek banking sector is to normalization and what challenges it could face.
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