Economists and analysts describe the €5.5bn new measures announced by the Greek government to bail out the economy from an energy shock as welcome but also necessary, but they warn that 2023 is expected to be a difficult year with a significant slowdown in growth and many challenges, potentially putting fiscal targets at risk, even if they are revised slightly lower – as expected. The Greek government has “committed” to returning to a primary surplus in 2023 after a deficit of 2% this year, with the target for a GDP surplus of 1.1% next year remaining for now, although it is expected to be revised slightly in downward due to the “burden” of subsidizing electricity and gas bills. While fiscal space is important due to the very strong performance of the economy this year in terms of GDP growth, nominal GDP growth and revenues, while a substantial decline in the debt ratio to 170% is expected, however, the government should not relax, K analysts say. and pursue a disciplined fiscal policy, especially in the run-up to the 2023 elections.

“Assuming the Greek government is successfully complying with European Union electricity demand reduction rules, coupled with the price slowdown already taking place in the country, robust 10-year bond spreads thanks to market confidence and stronger growth than what the Greek government is doing . It is estimated that the necessary fiscal space can be created in such a way that the budget deficit remains at around 2% in 2022,” Michalis Grammatikopoulos, deputy director of Moody’s Analytics and chief analyst for Greece, said in an interview with K.

Bank of America estimates are similar. “Such fiscal measures are needed to deal with the many shocks, especially in energy, that hit the Greek economy, as well as the economy of Europe as a whole,” Athanasios Vamvakidis, head of foreign exchange investment at Bank of America in Europe, told K. Much faster nominal GDP growth and strong revenue performance this year have created fiscal space to do so without compromising fiscal targets, he adds. “As long as the Greek government remains committed to returning to a primary surplus from next year and meeting new EU fiscal targets when they return, there is no problem,” said Mr Vamvakidis.

However, as he warns going forward, nominal GDP growth will be largely subdued due to much lower inflation as well as lower growth. Thus, the current windfall is not sustainable in the long run.

How analysts of international houses assess the economic development of Greece.

The new measures announced by the Greek government are similar to those implemented by governments in other European countries, so they are welcome to a certain extent, also estimates Oxford Economics, but given the scale of the unfolding energy crisis, they will not be enough to compensate for the blow to an economy that will survive a technical downturn .

As the chamber’s chief economist for Greece, Paolo Griniani, told K, while the Greek government’s GDP and budget projections for 2022 (5.3%) are broadly in line with those of Oxford Economics, expectations for 2023 (2.1 %). ) are a bit optimistic. “We forecast a technical downturn likely to occur in the coming quarters, resulting in near-zero growth in 2023. The main surplus target set for 2023 now looks ambitious and poses many challenges – even if revised slightly lower to 0.7% given the difficult economic outlook in both Greece and the EU, the unfolding energy crisis, the surge interest rates and the fact that fiscal adjustments are politically difficult to implement during a recession.

Rating agency Scope Ratings sees an element of satisfaction ahead of the elections in the new measures announced at the International Exhibition in Thessaloniki. 2023.

“The new measures, such as the abolition of the solidarity levy, further reductions in VAT and social security contributions, as well as additional spending measures, have an element of populism in view of the decisive elections next year,” notes Denis Sen, director of K “Scope. “ These measures could jeopardize targets to improve the primary balance – the official surplus target of around 1% of GDP for 2023, even if revised lower to 0.7%, is particularly at risk depending on how long it is extended or extended aid,” he notes characteristically. Strong output in 2022, very high inflation of 11.4% year-on-year in August, and a reduction in the primary deficit will contribute to the downward trajectory of debt, which will hit 171.3% this year. “However, the Greek government should not be too complacent with its recent economic performance and boosted credit ratings in conditions where markets are being severely tested,” Shen added, noting that Greek 10-year bond yields rose by about 140 points. basis points for the last month.

“Greece has significant fiscal space, but the government will need to maintain a disciplined fiscal policy after the completion of the enhanced surveillance program to boost market confidence and ensure that its debt and credit profile continues on a favorable trajectory,” concludes Scope Director and Principal Analyst for Greece.