Close surveillance by agencies, markets

Greece will be under constant surveillance by credit rating agencies and the markets in the coming months, as the energy crisis is likely to stretch into 2023, putting pressure on the budget in an election year when the government has targeted its return to primary surpluses and investment grade.

Two major rating agencies (S&P and DBRS Morningstar) may have taken Greece within one notch from investment level, but this distance will take months of fiscal monitoring to be covered.

“Budgetary performance is a key element in our analysis of Greece’s creditworthiness in the context of a potential next upgrade,” Marko Mrsnik, senior director of the European Sovereign Ratings Group at S&P, tells Kathimerini. “As stated in our research upgrade in April, we could raise our ratings on Greece again if structural reforms continue alongside stronger-than-expected economic and budgetary performance.”

Ricardo Amaro, senior economist at Oxford Economics, warns Athens may have to wait till 2024 for investment grade: “Support measures and the deterioration in the economic outlook mean that the fiscal performance is likely to be penalized in 2023. That’s not welcome news for rating agencies but I think they will also continue to put considerable weight on Greece’s long-term growth trajectory and fiscal plans, and in particular whether commitment to structural reforms and fiscal prudence remains intact following the upcoming election. Still, recent developments indeed warrant some caution when thinking about the timing of the next rating upgrade and the risk of a delay into 2024 is certainly increasing,” he stated to Kathimerini.

In any case Greece must remain prudent in the context of pressure for state support amid rising inflation and energy rates.

Dennis Shen, a director in sovereign and public sector ratings at Scope Ratings, views the “support provided to Greece by the Eurosystem and outperformance of budget dynamics as abetting the nation’s ratings path. However, although Greece holds fiscal space, we are nevertheless monitoring closely this fiscal position after the conclusion of the Enhanced Surveillance program earlier this month and such budget resources ought not be used wastefully such as to avoid changing expectations of prudent fiscal policy-making over the future.”