Moody’s Investors Service has published a report on the Government of Greece in which it sees real GDP growth in 2022of a healthy 5.3% driven by the strong tourism sector, domestic consumption and investment. However, the Service sees growth slowing sharply to 1.8% in 2023, as high energy prices feed through to broader price pressures and weaken household purchasing power, and rising interest rates will weigh on investment.
As Moody’s notes Greece (Ba3 stable) has recorded one of the strongest recoveries from the pandemic in Europe, which has supported an improvement in its core credit metrics. The report seeks to answer questions about the sustainability of these improvements and the key risks Greece faces in the near future.
As concerns Greece sustaining one of the highest growth rates recorded in Europe it sees that despite the healthy real GDP growth of 5.3% in 2022, driven by the strong tourism sector, domestic consumption and investment, growth will slow sharply to 1.8% in 2023, as high energy prices feed through to broader price pressures and weaken household purchasing power and rising interest rates will weigh on investment. Beyond next year, structural factors like Greece’s rapidly ageing population will continue to impede the economy’s long-term growth potential at around 1.2%. 
As far as the key risks arising from Greece’s which debt pile still its primary credit challenge, the Agency’ report notes that Government debt has declined to 193.3% of GDP at the end of 2021
from 206.3% in 2020 and projects that nominal GDP growth and primary surpluses from 2023 on will support further declines to 154% by 2026. However, Greece will still have
one of the highest debt burdens globally by then. The government’s cash buffer and an average time to maturity of more than 18 years reduce immediate liquidity risks, but maintaining the confidence of its official-sector creditors is crucial to ensuring Greece’s debt sustainability. 
Moody’s sees conditions in the Greek banking sector remaining positive. Despite inflationary pressures and signs of an economic slowdown, the report’s outlook on Greek banking remains
positive, predominantly because of the progress banks have made in reducing their non-performing loans from almost 50% during the euro debt crisis to 9.5% now. The improvement in asset quality will support banks’ organic profitability, and in turn will support economic growth and limit the government’s contingent-liability risks. 
As for what elections may portend, the changed election law that scraps bonus seats and introduces a purer system of proportional representation makes two rounds of elections likely, which are expected in spring 2023. It could take a number of weeks or more to form a coalition government. However, Moody’s sees a low risk of reforms being rolled back or of a material change in fiscal and economic policies.
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