Rating agencies to upgrade GDP forecasts

The Finance Ministry anticipates more good news from rating agencies after the impressive 16.2% growth rate of the second quarter. Agency officials that spoke to Kathimerini are preparing to raise their growth forecasts for the year, which after Q3 data boosted by tourism, could bring some coveted rating upgrades.

“Q2 numbers are much stronger than what we had expected, particularly in investments,” notes Steffen Dyck, vice president and senior credit officer at Moody’s.

“Overall, the Greek economy has now shown four consecutive quarters of real GDP growing more than 3% quarter-on-quarter. The strong performance in Q2 clearly poses upside risks to our forecast of around 4% annual growth for 2021, which could go up to 6.5%-7%,” he admits.

Dennis Shen, an economist and director at Scope Ratings, concedes that “while we anticipated strong 2.5% Q/Q growth for Q2, the outcome of 3.4% has exceeded expectations and presented upside risk to our already high forecast.” 

“The growth rate for this year looks more likely to fall at this stage in a range above even 8%, supported by release of pent-up domestic demand as forced savings are spent after re-openings but augmented by monetary and budget stimulus, the latter including beginnings of inflow of EU funding. We also should not forget that the 2021 growth rate is being supported by a highly favorable base comparison against depressed 2020 GDP, after last year’s 8.2% contraction,” he adds.

Fitch’s Sovereign Group Director Alex Muscatelli, is more conservative. “Fitch forecasts that Greek GDP growth will be 4.3% this year. The GDP release for the second quarter, together with the first quarter’s data, point to a higher growth rate than we expect. Over the first half of the year, GDP growth was around 7% in annual terms; if these growth dynamics were to be maintained, this could be close to the actual outcome,” he said.

Marko Mrsnik, senior director in the European Sovereign Ratings Group at S&P Global Ratings, and a lead analyst focused on eurozone sovereigns, notes that “the Q2 GDP release confirms a strong rebound in economic activity, which is in line with our expectations. In June we already revised our 2021 growth forecast to 5.6% from 4.9% in April.”