DBRS bullish on Greek econ prospects in wake of Sunday’s election

Results of the general election in Greece on Sunday, punctuated by New Democracy (ND) party’s landslide victory, points to continued political stability in the country and implementation of reforms that boost economic growth, which pave the way for credit upgrades, DBRS Morningstar assessed on Tuesday.

In a report released after Sunday’s results, DBRS focused on the first-past-the-post showing by center-right ND, led by incumbent premier Kyriakos Mitsotakis, and its unexpectedly strong 40.8 percent showing.

“If New Democracy manages to keep its share of votes (in a second election next month), combined with the same high share of parties not reaching the 3-percent threshold, the outcome of a second election could result in a strong outright majority for ND. This will bring another period of political stability for Greece. ND’s potential win would give it a mandate to continue with the implementation of reforms and investments, increasing Greece’s growth prospects. Improved growth prospects from the expected €30.5bn Recovery and Resilience Fund (RRF) expenditures for reforms and investments, is a contributing factor to potential credit improvements in DBRS Morningstar’s rating for the Hellenic Republic of BB (high) with a Stable trend,” DBRS stated.

The international credit rating firm added that:

— The election result gives a significant lead to ND.

— ND’s potential achievement of an outright majority in an expected second election in the weeks ahead would bring political stability and give government a mandate to continue with the implementation of reforms.

— We view reforms and investments that increase Greece’s growth prospects as strong contributing factors to Greece’s credit rating.

“Greece’s election result signals policy continuity and a continued reform path that could raise economic growth,” according to Nichola James, Co-Head of Global Sovereign Ratings. “Despite persistent global economic challenges, investment growth in Greece could even exceed expectations this year”.