Moody’s warns against backtracking on reforms

Greece faces a number of economic and political risks that could derail the progress it has made in the past eight years and three bailouts, Moody’s said in its analysis on the country in its weekly market outlook, dated August 23.

“Risks abound for Greeks to lose the ground they have made, like the mythical Sisyphus – who was forced to push a boulder up a mountain every day just to see it roll back down at night,” Moody’s said.

The rating agency identified outside forces that could disrupt the economic recovery, such as increasing protectionist policies and ongoing trade wars, as well as two main domestic risks for a sustainable return to international markets.

The first is that Greek authorities “will have to maintain their commitments to creditors, implementing what has been agreed upon so the country does not lose the credibility that the conclusion of bailout program has created.”

The second is that the government may face a change in power during the next election in early 2019, which “could add to uncertainty as to whether the country will enact the policies necessary to ensure sovereign debt remains sustainable.”

On the bright side, the country has posted five consecutive quarterly increases in real GDP, which is the best run of economic growth since 2005-2006. However, while growth has been consistent, the sources of growth are much less so, Moody’s said. “Exports have usually been positive, but consumption and investment have not.”

It is estimated that economic growth will keep up its pace over the coming years and consumption will contribute more to output as the labor market improves, driving stronger wage gains and boosting incomes and spending that will eventually trickle into the housing market, it said. “Stronger global growth bodes well for the country, in terms of both improved exports and a greater influx of tourists to the Mediterranean,” it added.

The agency noted that growth has also been hindered by the brain drain, which “altered the makeup of the Greek economy substantially, as the country could not support enough high-tech industries without highly skilled workers.”

Moody’s is expected to upgrade the country’s rating by one notch to “B2” in its next assessment, published on September 21.