Political scene in the light elections next year is placed rating agency Moody’s on key issues that shape and will affect its credit rating Greecealong with the path of debt growth and the banking sector.

On the political front, the change in electoral law makes it unlikely that one party will win an absolute majority or enough seats to form a stable ruling coalition, so the base case for the House of Representatives is two rounds of elections in the spring of 2023, while it is estimated that forming a government could take several weeks or more after the election.

However, Moody’s sees a low risk of no reforms or major changes in fiscal and economic policies. Still, he warns, political risk remains heightened as creditors demand that Greece continue to pursue fiscally prudent policies and pursue further institutional and structural reforms.

On the sustainability of strong growth, which it estimates at 5.3% this year, the house warns it will slow sharply to 1.8% in 2023 as high energy prices fuel broader price pressure and weaken household spending power. while rising interest rates will take their toll. investments. Beyond next year, structural factors such as a rapidly aging population will continue to hinder the economy’s long-term growth potential, which is set at around 1.2%.

The third question concerning the house is the “mountain” of Greece’s debt. While it fell to 193.3% of GDP in 2021 from 206.3% in 2020, and nominal GDP growth and primary surplus from 2023 onwards are projected to contribute to a further decline to 154% by 2026, it highlights that it will remain one of the highest in the world. . He stresses that high cash reserves and a favorable debt profile mitigate immediate liquidity risks, but maintaining creditor confidence is critical to ensuring its sustainability. As he warns, the main risk to the debt trajectory is a severe economic slowdown, not higher interest rates or fiscal easing. A 2.3% drop in nominal growth over the next five years would add 17.8% to the debt-to-GDP ratio.

Finally, on the other major issue for Greece’s rating, the health of the banking sector, Moody’s highlights the progress made in lowering the NPE ratio, which currently stands at 9.5%.