Investment grade: Which sectors of the Greek economy will benefit

The recovery of the investment grade in 2023 is looming on the horizon, even if it is still too early for safe conclusions. The achievement of an almost balanced budget in 2022 also works in this direction. The initial estimates spoke of a primary deficit of 1.6%, however it seems that the better course of the budget – due to inflation which brought much more revenue to the state but not to citizens – leads to an almost zero deficit last year, something that the political leadership of the Ministry of Finance has also mentioned.

It is worth noting that Eurostat will announce on April 24 the final figures of the Greek economy for 2022, both for the final percentage of growth and the deficit. It is worth noting that inflation and rising prices have played a particularly negative role in citizens’ incomes, however they have worked positively for the country’s fiscal figures, in terms of tax revenues, GDP and public debt (as a percentage of GDP) . In the event that the data is positive, then it is considered that another step will have been taken in the direction of the investment grade.

In the event that the last installment of 740 million euros from the Greek bonds is recorded in last year’s fiscal year, then the cash balance is revised for the better, with the result that the 2022 budget closes with a primary surplus against a forecast for a primary deficit of 1.6% of GDP. Such a development makes this year’s target for a general government surplus of 0.7% of GDP easier.

Financial benefit

One of the main questions is what such a result will contribute to the Greek economy. Officials of the economic staff of the government speak of an annual fiscal benefit of the order of 1 billion euros, while at the same time they expect the Greek public borrowing rates to be pushed down, limiting the cost of money for Greece, in a period of an upward cycle of interest rates not only of the euro, but of all strong currencies around the world. Regarding the cost of borrowing for the state, market players estimate that once the investment grade is recovered, initially, there will be a reduction in the spread of the 10-year Greek bond, despite the general climate of an increase in the cost of money, due to high inflation and of interest rates from the ECB.

Rating Agencies

At the same time, the perspective of the rating agency Standard & Poor’s on April 21 is awaited with particular interest, as it seems that it will be a forerunner for what will follow in the coming months, in the direction of upgrading the Greek debt. However, the main instrument for the upgrading of the Greek economy to investment grade by the rating agencies is the agreement on the primary surpluses of the following years, a discussion that takes place at a second level, however the final agreement has not yet been concluded with the Institutions. Many analysts consider that the investment grade is of great importance, especially in a phase of upcoming tightening of fiscal rules in the eurozone, with all that this implies for the benefit programs of European countries and indeed at a time when international economic developments are turning to the worst , as the IMF recently warned.