Greece retains the capacity to service its debt, the European Commission said in its 4th post-program surveillance report released on Wednesday.
The report’s Executive Summary specifically, concludes as follows: “Greece retains the capacity to service its debt. Greece was upgraded to investment grade by a third major rating agency in December 2023. According to the debt sustainability analysis, Greece is deemed to face low risks in the short term, high risks in the medium term and low risks in the long term. Government gross financing needs for 2024 and 2025 are low, on the back of projected primary surpluses and moderate debt amortisation, which is also due to the earlier partial pre-payment of the Greek Loan Facility. Greece retains a sizeable cash buffer and has maintained continuous market access amidst narrowing yield spreads following recent upgrades to investment grade.”
The report’s macroeconomic and budgetary projections, including those underlying the debt sustainability analysis, are “in line with the Commission’s Spring 2024 Economic Forecast released on 15 May 2024 (with cut-off date of 30 April 2024),” the Commission said.
In its summary, the report makes the following points:
– Economic activity is expected to pick up slightly, with growth continuing to exceed the long-term potential in 2024-2025. Greece registered 2% real GDP growth in 2023, well above the EU and euro area average of 0.4%. Output growth is expected to regain momentum, while inflation is expected to decrease at a moderate pace reaching 2.8% in 2024 and 2.1% in 2025.
– The headline budget deficit improved in 2023 and is expected to improve further to 1.2% of GDP in 2024 and 0.8% in 2025.
– Banking sector profitability was strong in 2023, while the workout of legacy debt by servicers is advancing but continues to face difficulties.
– Financial sector policies to tackle various legacy issues are being implemented broadly on schedule and are set to be completed in 2024.
– The Hellenic Corporation of Assets and Participations (HCAP) posted its best financial performance since it was established.
– The privatisation transactions managed by the Hellenic Republic Asset Development Fund are broadly on track, and
– The codification of the labour legislation is underway and still needs to be completed.
(The full report is at: https://economy-finance.ec.europa.eu/document/download/fa43e17a-22db-4530-9107-72c06937d6b8_en?filename=ip290_en.pdf.)