Ratings agencies expect the government to be formed after the second polls to follow the path of reforms and pro-growth policies, along the Greek debt sustainability path already drawn. However, they point out that the challenges Athens will face are significant and extend beyond the economic front.
S&P focuses on Greece’s external imbalances, an issue it has long warned about, stressing that they have worsened in recent years. As analyst Samuel Tilleray explains to Kathimerini, the current account deficit worsened dramatically in the wake of the 2022 energy crisis, reaching 9.7% of GDP in 2022, from 6.8% in 2021 (and just 1.5% in 2019).
At the same time, he emphasizes that reforms which for the agency are considered key for the evaluation of the country have not yet been completed. As he explains, it is important that the next government demonstrates its intention for reforms that boost growth and maintain a strong fiscal performance. “Reforms that we consider important to boost Greece’s potential growth, such as the completion of revisions to the judicial system and the finalization of the national cadaster, remain incomplete,” Tilleray warns.
Fellow agency Moody’s emphasizes that although in recent years the improvement in Greece’s reform process and on the fiscal front has been evident, there is still much important work to be done with many significant challenges on the way.
First, Greece remains vulnerable to external risks due to its current account deficit. According to the agency, high energy prices combined with strong consumption and investment will keep the deficit high in the coming years. Second, the unemployment rate in Greece has improved significantly over the last 10 years, but remains one of the highest in Europe. Finally, the country also faces an extremely unfavorable demographic profile.
Fitch’s concerns are similar. As director Federico Barriga notes to Kathimerini, “despite the strong performance recently, economic activity could again slow down due to structural constraints such as the aging of the population or the inability to introduce reforms.”