In a recent report, Barclays analysts said that Greece is poised to go through a “3rd economic megacycle.” In plain English, this means that Greece is poised for a period of economic growth similar to what it experienced in the late 1990’s after signing the Maastricht treaty in 1992.
Other prominent figures seem to agree:
Greece’s economy “has turned a page,” quoted Greek Finance Minister Christos Staikouras.
European Commissioner for Economy, Paolo Gentiloni, said that Greece’s growth is expected to be “double the eurozone average” in 2023.
Looking back to 2010:
Wind back the clock just 10 years, and Greece’s S&P Rating (an international rating that determines how safe an investment in another country is), was at SD. SD stands for “standard default”, and in 2012, at the height of the economic downturn, this was not good news.
Greece has come a long way since then, and is almost back to being classified in the “investment-grade” category.
What does “Investment Grade” Mean?
Having an investment grade rating means that institutional investors, many of whom invest from overseas, have the possibility to invest in securities (think bonds, stocks, etc). Big pension funds and insurers can start investing in the Greek economy as they did before the crisis.
For Greece, this means cheaper and more stable funding sources for the future. Not only the government, but also local lenders in Greece, would also have better borrowing costs.
Only 70 countries are classified by S&P as “investment grade.”
Declining Debt:
At the same time, Greece has been able to reduce its debt from 206% of GDP at pre-pandemic levels to 171% today.
The chief exec. of Eurobank, Fokion Karavias, says that if Greece was granted investment-grade status, this would be “the greatest turnaround in the European financial system”.
Is This Happening in the Rest of Europe?
Compared to other European nations, Greece’s rebound is more prominent. GDP grew 8.4 percent in 2021 and 5.9 percent in 2022.
At Goldman Sachs, a major international investment bank, economists are saying that Greece will outperform other European bloc countries in the next 2 years.
What Caused this Surge?
Exports:
Dimitris Malliaropulos, chief economist of the Greek central bank, calls exports the country’s “biggest success story.” Between 2010 and 2021, exports of goods grew 90 percent, while the euro area as a whole only grew 42 percent.
Tourism:
This is the Greek economy’s largest breadwinner, making up 20% (yes, you heard that right) of GDP. It recently rebounded to hit 97 percent of levels before the pandemic.
Real Estate:
Not only are foreigners taking vacation time in Greece – they are also buying real estate. Property sales to buyers from overseas were 4 times higher in 2022 than in 2007.
Nevertheless, Greece’s path to an investment-grade rating looks promising. It is a good sign for Greece’s economy as a whole, as well as for foreign investors in Greece.
