Her strong performance Greece against her Eurozone and the upward trajectory of the country’s home valuations on the way to investment grade, are analysts’ biggest catalysts for the Greek economy, as well as for Greek bonds and banks. OUR Morgan Stanley he even “sees” a threefold increase to investment grade by mid-2024, h Citygroup “bets” on a further significant reduction in Greek spreads, while Goldman Sachs confirms its positive attitude towards Greek banks thank you also for the prospect of Greece joining the group of investment grade countries soon.

In particular, a new Morgan Stanley report titled “Greece: Great Expectations” notes that the Greek economy will continue to trend ahead of the eurozone economy this year and in 2024, recording growth rates of 2.5% and 2.2% respectively (vs. .7% and 1% for the eurozone), which, combined with the continuation of the current policy of reforms and fiscal consolidation, will lead to the restoration of the investment level of the country. Falling inflation and real income growth are expected to support private consumption in the second half of 2023, while while tight monetary policy will weigh on the economy, investment in Greece will continue to be supported by the implementation of the Recovery Fund. and from inflows of foreign direct investment, which he estimates will reach record levels.

A recovery to investment grade is almost certain, according to Morgan Stanley, given that the New Democracy majority government will continue to lead the country on the path to fiscal consolidation and the implementation of Recovery Fund reforms. Thus, he supports the view that Greece will be able to recover this milestone with three households by the first half of 2024, but “sees” a greater likelihood of an earlier increase if growth unexpectedly turns out to be higher than his expectations.

For its part, Citigroup does not rule out that Fitch may assign the long-awaited investment rating to Greece this Friday, although it considers it more likely to upgrade the country’s outlook to positive. The change in outlook is expected to reduce the Greek bond spread by 10 basis points, while a return to investment grade will result in a contraction of around 20-25 bps. originally, according to him, from 134 BC. Today. “The results of the first round of elections and the rapid decline in debt/GDP have strengthened the prospects for an upgrade for Greece, which is currently the only country in the eurozone with room for an upgrade,” Citi notes. indicates that.

It is noted that a few days ago, Bank of America predicted that flows into Greek bonds when the investment grade “comes” will be as significant as during the ECB’s emergency PEPP program, and is expected to reach 16 billion euros. This is a significant amount, given that there are only 74 billion euros of Greek bonds in circulation, of which 35 billion euros are held by the ECB.

banks

Greece’s upgrade to investment grade (which it will place in the second half of 2023) is one of three catalysts for Goldman Sachs that will lead to further gains in Greek bank stocks. Positive changes in analysts’ estimates of their size and additional details about management’s plans to return to the distribution of dividends make up the other two. Goldman Sachs noted, among other things, that Greek banks performed strongly in the first quarter, comfortably passing the threshold set by analysts, while it estimates that the NPE ratio will fall to 5% this year, to 4% in 2024 and to 3% in 2025, thus approaching the EU average. 2%-3%.