A new ND government is positive about Greece’s creditworthiness – It foresees one of the largest debt reductions worldwide

The strong percentage obtained by New Democracy in Sunday’s elections (21.05.2023) significantly increases the probability that it will form a government again after the new elections that will be held at the end of June, Moody’s credit rating agency notes in its analysis.

This means, adds Moody’s, that with the victory of New Democracy in the elections of June 25, there will be continuity in fiscal and economic policy and is positive for Greece’s creditworthiness (credit positive).

As he notes, maintaining the focus on improving the business environment and the health of the banking sector, along with the implementation of milestones and reforms under the national recovery plan, will support economic growth.

“Combined with a commitment to fiscal adjustment and an increase in primary surpluses, maintaining current fiscal and economic policies improves the prospects for a significant reduction in Greece’s public debt burden,” it says.

Moody’s forecasts that Greece will see one of the largest debt reductions globally, with general government debt falling below 150% of GDP in 2025 from 171.3% in 2022, thanks to the prospect of significantly higher nominal GDP growth in the coming years.

He also notes that the Greek economy recovered strongly after the pandemic, with real GDP growing by 5.9% in 2022 and 8.4% in 2021 after a 9% decline in 2020.

Although the Greek debt-to-GDP ratio will remain very high in the coming decades,

According to Moody’s, the Greek debt burden has become significantly more sustainable, despite the fact that its ratio to GDP will remain very high in the coming decades, thanks to very favorable loan repayment terms from the Eurozone and its large easing of debt provided by its creditors in the Eurozone since 2017.

Almost 80% of central government debt is owed to Eurozone institutions, including the European Central Bank and other Eurozone central banks, the house notes.

“The result is that Greece’s interest payments as a percentage of government revenue are low and will remain low for an extended period, even after taking into account the fiscal impact of the pandemic and the return to regular issuance in the capital markets.”

With this rate at 5.5% – 6%, Greece’s ability to repay its debt will remain stronger than Italy’s, the house notes.