Greece, a champion in debt slashing
ND election victory is a credit-positive event, commented Moody’s, pointing to an upgrade
Moody’s projects that Greece will post one of the largest debt reductions internationally over the next few years, stressing that the sustainability of the Greek debt is already at a much better level than that of Italy (which is rated investment grade) and will continue to be.
This can only be another strong signal for an upgrade of Greece’s rating in the near future, as according to all rating agencies, a key criterion for improving its rating and recapturing investment grade is confidence that the debt is on a steadily downward trajectory.
In a new analysis, Moody’s reiterated that with the result of May’s elections, the possibility of another New Democracy government increases significantly, which entails continuity in fiscal and economic policies and is therefore considered a credit-positive event.
The continued focus on improving the business environment and the health of the banking sector, combined with the implementation of milestones and reforms under the Recovery Fund will support economic growth, the rating agency adds. This, along with the commitment to fiscal consolidation and the increase of primary surpluses, as well as the maintenance of current fiscal and economic policies, improves the prospects for a significant reduction of Greece’s public debt, the agency emphasizes. That will be supported by growth, Moody’s points out, as the Greek economy has recovered strongly after the pandemic, with real GDP increasing to 5.9% in 2022 and 8.4% in 2021, after a 9% contraction in 2020.
Therefore, Moody’s predicts that Greece will see one of the largest public debt reductions in the world, with the debt ratio falling below 150% of GDP by 2025, from 171.3% at end-2022.
The large de-escalation that Greek debt has already undergone was also noted by UBS, as, despite higher interest rates, the debt-to-GDP ratio continues to decline, falling even below pre-Covid levels thanks to the strong recovery of nominal GDP, which was boosted by high inflation.
According to the Swiss investment bank, Greece is experiencing the second biggest fall in the entire eurozone after Portugal.
