Fitch Ratings expects Greece to show continued fiscal consolidation in 2023, with the primary fiscal surplus rising to 1.2% of GDP, supported by strong revenue growth and spending constraint. Also, growth is seen at an average of 2% in 2023-2025. 

Under its baseline scenario, Fitch projects Greece’s public debt/GDP ratio to decline by over 50pp by 2025 from a high of 206% in 2020, “one of the sharpest declines across our rated sovereigns, but still 3x the ‘BB’ median. Stable financing conditions, limited debt-rollover needs and a sizeable cash position (35 billion euros) will continue to support debt management,” said. 

GDP growth is exceeding that of most eurozone countries owing to rising investment and very solid growth in tourism in 2023. 

“Combined with relatively stable inflation and continued absorption of EU funds this should help to keep growth at an average of 2% in 2023-2025. Persistent current account deficits are likely to be mostly financed by rising FDI and non-debt- creating capital inflows,” Fitch argued. 

The agency cited as positive sensitivities the confidence in a post-election fiscal policy that leads to a firm downward path for the government debt/GDP ratio over the medium term and the improvement in medium-term growth potential and performance, for example, driven by higher investment dynamics and/or implementation of structural reforms. 

In contrast, Fitch see as negative sensitivities a sustained upward trend in public debt/GDP, for example due to structural fiscal loosening, weak growth or materialisation of contingent liabilities from the banking sector. Renewed adverse shocks to the Greek economy affecting the economic recovery or Greece’s medium-term growth potential would also impact negatively. 

The next rating review by Fitch is scheduled on December 1, 2023.