OUR Hellas is expected to again be a positive macroeconomic surprise in Eurozoneestimates n UBS and highlights four factors that make her more optimistic about her prospects. Greek economy. The Swiss bank raises its forecast for Greek GDP growth this year to 3% from 2.5% earlier, although it lowered its estimate for 2022 to 5% (from 6.4% earlier) due to a weak third quarter, he explains. .

The first reason that makes UBS more positive on Greece is that, thanks to lower energy prices in 2023 and subsidies, the large gap that opened between gross value added and GDP in the third quarter of 2022 is expected to narrow, and this will improve the GDP forecast. this year. Secondly, also due to lower energy prices, inflation will fall to 3.3% this year from 9.6% in 2022. This, coupled with talk of a new increase in the minimum wage from April 1 (to 8%-9.5%), is expected to result in higher increases than real wages.

Inflation is estimated to fall to 3.3% from 9.6% in 2022.

A third reason for the Swiss bank’s optimism is its very strong financial performance, with both the primary deficit and primary surplus expected to be well above target in 2022. He notes that this wider fiscal space this year allows for either faster debt reduction or more financial support.

Fourth, UBS has significantly improved its estimates of eurozone growth in 2023 (up 60 basis points to 0.8%), suggesting an improved external environment for Greece. At the same time, UBS looks especially optimistic about the outlook for Greek bonds and Greek banks. According to him, the reduction of the Greek spread this year, despite the aggressive policy of the ECB, is associated with very good macroeconomic prospects for Greece. While the uncertainty associated with a lengthy election process could put upward pressure on spreads in the short term, the trend remains bearish for all of 2023. A recovery to investment grade would further lower the cost of servicing Greek debt, as well as outperform Greek bonds, he estimates.

Finally, for Greek banks, thanks to strong economic growth, they “see” a significant increase in new loans, better-than-expected asset quality and a healthy capital position.