Ratings agency Fitch raised its outlook on Greek debt to positive from ‘stable’, meaning the Greek economy will upgrade over the next 12-18 months, reaffirming its ‘BB’ rating late on Friday.
The event also bolsters the €12 billion ODDIH issuance program for 2022, while the market estimates Greece could enter the markets in the near future with a €3 billion 15- or 20-year bond issue.
8.3% growth in 2021
Greece’s GDP is forecast to grow by 8.3% in 2021, with the recovery continuing into 2022, with growth hovering at 4.1% this year. Greece will repay outstanding IMF loans and loan payments in 2022 and 2023 from a “lending facility” totaling 7.2 billion euros (approximately 3.8% of GDP), with half of the amount financed by a “cash cushion”.
Strong growth and narrowing fiscal deficits will contribute to a faster-than-expected reduction in public debt in the context of low borrowing costs, while improving bank asset quality and sharply reducing non-performing loans (NPL), strengthening the capacity to lend to the real economy.
Fitch forecasts that the debt-to-GDP ratio has declined* to 198.4% in 2021 from 206.3% in 2020, with further declines to 190.3% of GDP in 2022 and to 185.3% in 2023.
The pandemic is a short-term risk
The pandemic poses a short-term risk to the Greek economy, while the risk of delays in the implementation of investment plans under the Greek Sustainable Development and Development Plan, of which grants alone amount to around 18 billion euros (just under 10% of GDP in 2019), which will payable over six years.
The key to valuing Greek debt is the fact that Greece has a high per capita income that is well above the average of ‘BB’ and ‘BBB’ rated countries. It also ranks high in governance and human development among non-investment grade countries.
On the other hand, of course, the country still has a very high level of non-performing loans (NPL), as well as very high debt, which in 2023 will be three times higher than the median forecast for countries with a rating of “BB” (which is 56% of GDP ).
However, the country has a liquidity buffer that corresponds to 18% of GDP, while it has a favorable debt profile with a cost of service of 5.6% this year, compared to 9.7% of GDP, which has the same rating as and Greece. In fact, the average duration of Greek debt is one of the largest in the world at 20.5 years, while the volume of debt has a fixed interest rate, which reduces the risks of rising borrowing costs.
Finally, the ECB, which bought 34.9 billion euros worth of Greek bonds (19.4% of projected 2021 GDP) until November last year, said it would continue to support Greece after the end of PEPP next March, through flexible reinvestment of maturing bonds by 2024, or even reactivate PEPP if necessary.
Distance from the “investment stage”
It should be noted that today the Greek debt is two “steps” from “investment grade” according to the ratings of Fitch, Standard & Poor’s and DBRS, and three steps from the ratings of Moody’s. JP Morgan expects Greece’s credit rating could be upgraded by all four major rating agencies in the first half of 2022.
The return of the country to “investment grade” could be achieved in late 2022 or early 2023, while financial officials estimate that the acquisition of “investment grade” will be achieved sometime in 2023.
PS I read it and shed a tear. About his suspicions about the so-called. rating agencies and their public conclusions wrote back in 2014-2019before the ND came to power. At that time, all rating agencies confused the government (and economic situation) of Greece with manure, despite the fact that the ratio of GDP to the national debt was less than in 2021.
*These are real statistics and forecast for the coming years on the national debt of Greece, excluding political technologies and PM statements.
According to data from statista, Greece’s national debt, in mid-January 2022, is 421.72 billion US dollars, with the prospect of further growth, and a GDP of 245 $ billion, with growth only due to US dollar inflation, which in 2021 was at least 6.8%.