Greek economy – With an eye on Fitch

The Greek economy is hanging on the lips of Fitch as on January 14 the agency’s verdict on the evaluation of Greece will show if the year starts at an upward pace.

The American rating agency opens the dance of upgrades and it is a given that the next 12 months will show whether Greece will finally leave behind the trauma of bankruptcy – after 12 years – and will regain the investment grade it lost after April 2010, when Athens also appealed to the International Monetary Fund.

It marks the beginning of a year in which the bar of expectations has been set high – for the country to return to economic normalcy – despite the fact that the pandemic still remains and the energy crisis has been added on top. The ratings agency is meeting with Greece this year on January 14, July 8 and October 7. Several companies have predicted that Greece will be removed from the “garbage” category in the second half of the year and the Greek side has set a goal of recovery by 2023.

Following the decision of the European Central Bank, there is a strong possibility that Greece will return to the investment level before 2023. In a recent report, Fitch commented on the announcement of the European Central Bank that it can buy Greek government bonds by the end of 2024 and reported that this reduces the risk of a sharp rise in borrowing costs as the Pandemic Bond Extraordinary Program (PEPP) expires. It also stressed that the next scheduled review of Greece’s credit rating ‘BB’ / Stable is on January 14th.

“Greater confidence in government debt / GDP returning to a steady decline after the Covid-19 shock, continued improvement in asset quality in systemically important banks and better medium-term growth potential and performance could lead to a move for positive evaluation. Lower deficits and steady economic growth will support debt reduction. We forecast real GDP growth of 8.3% this year and expect the recovery to continue in 2022 as the next generation of EU capital recovery accelerates and increases real spending, with growth of 4.1% and 3.6% in 2022, and in 2023. But the debt index will remain high, just below 188% in 2023.”

“Omicron” causes concerns

However, the rating agencies are sounding alarms for the world economy. The Omicron variant could hurt global growth prospects but also push up prices, according to Fitch Ratings and Moody’s.

“The Omicron variant poses risks to global growth and inflation, especially because it came at a time of already tense supply chain, high inflation and labor market shortages,” said Elena Dagar, Moody’s Deputy CEO, in a statement. sent to Reuters. It is also likely to hit demand during the upcoming Christmas holiday travel season, he added.

Fitch said in a statement that it was too early to include the impact of the Omicron variant on its growth forecasts and that more information should be provided on its transmissibility and severity. “Currently we believe that another major, simultaneous global recession, such as the one seen in the first half of 2020, is very unlikely, but rising inflation will complicate macroeconomic reactions if the new variant prevails,” he said.

The moves of the ministry and the role of IMF chief Lagarde

The Ministry of Finance has planned a roadmap with the main goal of exiting the enhanced supervision from June, the early repayment of loans of the first Memorandum – IMF (about 7 billion euros) and at the same time to effectively implement the plan from the Recovery Fund and the gradual return to surpluses. The main vehicle is the forecast for strong cumulative growth of 11.7% in the two years 2021-2022, the relatively high cash reserves amounting to over 32 billion euros and the positive course of the state budget by exceeding the revenue targets.

The new round of ratings is coming from January and the vote of confidence for the pandemic emergency purchase programme (PEPP), after March. It is noted that since the results of 2021, S&P has upgraded the country to BB, while on the same scale BB is the rating of Fitch. Moody’s rating is lower at Ba3 with stable outlook. In the fall, the rating agency DBRS Morningstar upgraded one step to BB from BB (Low), with positive outlook. It was a week before the upgrade from “Scope Ratings” (BB + from BB).