Fitch: The debt reduction trend supports positive outlook prospects

The revision of the outlook of the Greek economy to a positive one reflected strong economic growth and a rapid reduction in the budget deficit from the expected fall in public sector debt, according to Fitch Ratings, stressing the rising but historically low borrowing costs ( the yield on the 10-year bond between 2015 and 2019 was around 6.25% on average).

The international rating agency notes that it has already stressed that the gross financing needs (GFNs) for the Greek government will peak in 2023 and will remain below 15% of GDP.

Fitch revised forecasts now point to lower GFNs over the next four years (cumulative 4.5% of GDP).

This revision also reflects the repayments of the outstanding loans of the IMF and the advances of the 2022 and 2023 installments of the Hellenic Loan Facility, amounting to 3.8% of the projected GDP.

According to the ratings agency, the public debt increased sharply due to the Covid-19 pandemic and the debt ratio is the third highest among the states with a Fitch rating and about 3.5 times the “BB” average.

However, mitigating factors support the sustainability of public debt.

The analysts of the study, state that the liquidity reserve of Greece is important: the favorable nature of the majority of the Greek government debt means that the cost of debt service is low and the amortization schedules are manageable, while the average maturity of the Greek debt is one of the highest. from each state, at 20.5 years.

This will reduce the impact of rising bond yields. The interest rate to income of Greece is much lower than the median “BB” and slightly lower than the median “BBB”. The inclusion of Greek bonds in the ECB’s emergency market program for the pandemic has been an important source of funding flexibility.