S&P gives mixed messages ahead of its valuation Hellas this month as though she looks confident in her prospects economy.highlights the significant risks facing banking industry.

In its new report, the chamber has updated its forecast for development in Greece this year to 5.6% from 3.5% earlier, underscoring that the country’s outlook remains good despite the unfavorable external environment, the energy crisis and high inflation. He expects the impact to be manageable and estimates that Greece’s growth will outpace the Eurozone average over the next three years, although 2023 will be a year of slowdown and Greece’s GDP is hovering at 1.8%.

The ongoing recovery of its industry tourism estimates that this will support economic growth and help to gradually reduce the current account deficit, which will be burdened by significantly higher energy import prices. At the same time, the budget deficit is expected to be larger than previously forecast, reaching 4.6% of GDP in 2022 due to government fiscal measures to curb inflationary pressures due to the energy crisis.

The asset quality of Greek banks remains one of the weakest in the EU, according to the House of Representatives.

However, for the banking sector, S&P notes that, despite visible progress, it still faces increased financial risks, namely still high NPEs against the EU, a shallow domestic debt market, limited access of Greek banks to soft markets , as well as the fact that the Greek authorities have not solved the problem of tax deferral.

According to S&P, the asset quality of Greek banks remains one of the weakest in the EU. While the sector’s NPE ratio is expected to fall below 7% by the end of 2023, the creditworthiness of Greek banks is nonetheless under threat due to the complete withdrawal of pandemic-related support measures and the indirect impact on available income from higher inflation , lower global demand and other consequences of the Russian invasion of Ukraine.

At the same time, S&P does not expect Greek banks to have stable access to available unsecured market financing next year. He believes that Greek banks are facing a more competitive environment, while the private sector is still recovering from the crises of the last decade. However, he estimates that their profitability will benefit from significant cost-efficiency gains over the past 12 months following store closures, voluntary exit programs, the benefits of digitization, and a focus on commission income.

Finally, the chamber notes that the quality of banking supervision and regulation in Greece is improving due to its participation in the Unified Supervisory Mechanism, and the Bank of Greece has learned from the events of the past two decades. However, the ongoing restructuring of Attica Bank following its 2021 bankruptcy following huge losses from NPLs has again shown that the country’s oversight lacks foresight.