By Natassa Stasinou

 

 

Greece is moving in pre-election pace, as the Prime Minister, Kyriakos Mitsotakis, announced that elections will be held on May 21. Although it seems likely that a second election is necessary for the formation of a government, international analysts do not expect the course of the economy and the goal of recovering the investment grade to be affected. 

 

In fact, in a new note, Goldman Sachs states that the Greek economy appears in a good position to improve its prospects and sees a possible recovery of the investment grade on April 21. On that date, the assessment by Standard & Poor's is scheduled. 

 

Goldman Sachs notes that the decision for elections on May 21 comes after a week of political unrest, following a major train crash on the evening of February 28. Current polls show a narrow lead for New Democracy, the prime minister's party, over SYRIZA, the country's second-largest party. This makes a runoff in early July more likely. 

 

While the election to be held in May is set to be based on a proportional representation system, the system for the July run-off election will reinstate majority bonuses.  

 

Whatever the result is, the Greek economy appears well positioned for an improved outlook and possibly an upgrade to investment grade from S&P on April 21, Goldman Sachs believes.  

 

Greece remains relatively resilient, he points out, thanks to an increase in private credit to the real economy, showing a clear rise in 2022 after 10 years of contraction. The pick-up in growth supported the latest phase of the investment recovery (+14.7% in 2022).  

 

Goldman Sachs analysts also note that investment growth could benefit from the support of the Recovery Fund which, in the case of Greece, comes to about 17% of GDP and extends until 2026.  

 

Moody’s is also noting the resilience of Greek economy. It expects growth of 1.8% this year and 1.7% in 2024.  

 

In a recent conference, organized by the Economic Chamber of Greece, Alex Muscatelli, director of Fitch, noted that the upgrad of Greece’s crediting rating one notch below investment grade (to BB+) was due to improving public finances, strong nominal GDP growth, and an improvement in banking system. 

 

We expect more improvements, he said, adding that another upgrade may come soon. We are seeing positive results that contribute to the upgrade, he noted, adding that the government will continue to take measures that will improve the economy.