In the near future, Greece will be under constant watch from rating agencies and markets as the energy crisis is likely to last until 2023, putting pressure on the budget in an election year as the government sought to return to primary surpluses and rebuild the economy. investment grade.

With the release of increased surveillance, the real judge of the Greek economy is the markets. Since reaching investment grade in 2023 is one of the government’s main goals, which is of course not possible before the elections, markets and rating agencies are keeping a close eye on the actions of the Greek government, especially at a time when there is relative financial freedom thanks to the suspension. Pact of Stability and Growth. The deepening of the energy crisis has led to new support measures that were not originally budgeted and are currently “covered” by lead revenues, but – with no end to the crisis in sight – it is difficult to estimate how much further support will be needed, especially in 2023.

“Fiscal performance is a key element of our analysis of Greece’s creditworthiness in the context of a possible next rating upgrade,” said Marko Mrznik, S&P’s senior director for Europe and lead analyst for Greece, to K. “We could further upgrade Greece’s rating if structural reforms continue along with stronger-than-expected economic and fiscal performance,” he adds, pointing out that “at S&P we forecast a budget deficit of 4.2% of GDP.” this year and 2.2% in 2023.” . At the same time, the house warns that a budget collapse is one factor that will lead to a downgrade, delaying a return to investment grade.

“The fiscal balance is critical to the ratings, and a budget blowout would result in a downgrade.”

Very strong growth and tourism, as well as excess revenues and rising inflation, have shielded Greece’s fiscal space, leaving room for energy support measures in 2022. However, this support has limits, and the budget is not yet in the 2023 package, where the government has set a primary surplus target of 1% of GDP after a primary deficit of 2% this year.

There is a risk of delaying a return to investment grade until 2024, economists warn. As Oxford Economics economist Riccardo Amaro points out in K, it looks like the energy crisis will remain sharp and likely to worsen by winter, so further support measures are probably justified, but given Greece’s fiscal constraints, the most appropriate policy is targeted (rather than total) support. “However, as Mr. Amaro warns, “support measures and a worsening economic outlook mean financial performance is likely to suffer in 2023.” And, as he stresses, “this is bad news for the rating agencies, which will continue to weigh heavily on Greece’s long-term growth trajectory and fiscal plans, and in particular on whether the commitment to structural reforms and fiscal prudence remains intact after the upcoming elections.” he adds, “recent developments call for some caution in meeting the investment grade target, and the risk of delaying that 2024 milestone is certainly rising.”

According to Dennis Sen, director of Scope Ratings and chief analyst for Greece, in “K” Greece’s debt ratio is expected to decline faster than expected, from 206.3% of GDP in 2020 to 171.3. % by the end of 2022 before potentially dropping to 146.5% by 2027. On this basis, even with the scale of measures announced and granted by the government in connection with the current energy crisis, the House of Representatives believes that Greece retains a “cushion ” in terms of the available fiscal space before there are concerns about significant fiscal slippage.

Scope expects Greece’s primary deficit to approach 0.75% of GDP in 2022 – within the 2% target – before returning to a balanced primary account by 2023. fiscal consolidation and the trajectory of a constructive evaluation of Greece. “However, while Greece does have fiscal space, we are closely monitoring its fiscal position after emerging from heightened oversight, and these fiscal resources should not be used unnecessarily to avoid changing expectations for prudent fiscal policy going forward.” the senator warns.

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For now, markets are not worried about the risk of derailing the country’s fiscal trajectory, while increased political risk from the wiretapping case has been added to the Greek equation. Two out of four agencies (S&P and DBRS) can rate Greece one step below investment grade, but that critical distance will require months of Greece’s fiscal review before it is covered. While the support provided by the Greek government has certainly been costly so far, it should be assessed in two ways. First, the absence of any support will lead to a deterioration in economic performance, which in itself will lead to a decrease in budget performance. In addition, while government spending has increased, higher inflation provides a temporary boost to some revenue streams—for example, VAT receipts have increased due to higher prices.