July 22, 2024

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Fitch ‘turns a blind eye’ to Greece’s upgrade – margins for better financial performance

Fitch ‘turns a blind eye’ to Greece’s upgrade – margins for better financial performance

The outcome of the national elections, in which New Democracy has secured a parliamentary majority, significantly reduces the risk of potential political instability and allows for continuity of politics, she said. Fitch Ratings.

This means that It is expected that economic reforms and public financial adjustments, which have supported growth and benefited from the sustainability of public finances in recent years, will continue.

According to the rating agency, the renewal of the New Democracy’s parliamentary majority will allow it to continue its policies for the period 2019-2023, including the rapid reduction and de-escalation of public debt and the implementation of economic reforms, including the recovery fund, which aims to stimulate investment. Kyriakos Mitsotakis himself stated that “major reforms will advance rapidly”.

It should be noted that Fitch Ratings recently affirmed Greece’s credit rating at “BB+”with its financial estimates based on the assumption that the authorities will continue to meet various milestones and goals within the framework of the RRF (For the Release of European Resources), which is the main “lever” for opening public and private investments, short and medium condition.

The Greek authorities estimate that there will be disbursements of grants and loans from the Recovery Fund amounting to €3.6 billion (1.7% of GDP) in 2023, €7.1 billion in 2024 (3.4% of GDP) and more than €6 billion (2.8%). of GDP) in 2025-2026. This will help restore capital stocks lost over the past decade and could encourage an acceleration of private sector investment, helping to keep real GDP growth within Fitch’s estimated range of 2% – 2.5% in 2023 – 2026, higher than the Eurozone. . The reaffirmation of the government’s commitment to reform suggests that growth may exceed these expectations.

The election result also confirms Fitch’s belief that fiscal policy will continue to target deleveraging, which exceeded expectations under the previous ND government. The Greek stabilization program aims to improve financial conditions further, with primary surpluses lowering the public debt ratio. Fitch Ratings estimates the primary surplus will widen to 1% of GDP this year and 2% in 2024, from 0.1% in 2022.

Under the base scenario, which is characterized by an improving financial position and stable nominal growth, The public debt ratio is expected to decline to 162.2% in 2023 and 154.4% in 2024, which would mean a drop of 50 percentage points from a high of 206% in 2020, although it is still well above the state average. States that have a “BB”. evaluation.

As for them The risk of short-term financial failureTo a large extent, Fitch notes, this is the case Limited Absent the significant slowdown in government revenues and the initial surplus of €2.4 billion in the first quarter. These figures are associated with a reduction in internal political “shocks” and risks That there is room for more outperformance. The New Democracy Foundation has pledged to spend 9 billion euros over the next four years on its election campaign, but about three-quarters of that amount is already included in the current budget and stabilization programme. If government revenue continues to grow at its current rate, Some of these measures can be pushed forward without resulting in greater incapacitation.

In the long term, debt reduction may pose greater challenges and difficulties due to pressures on the social spending side, while debt servicing costs may increase if Greece strengthens its market position through more spending. According to the rating agency, many structural reforms in more politically sensitive areas, such as health care, may be more difficult to implement.

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