Greek economy enters new era on favorable growth, financial outlook
Greece’s economy is poised to enter a new era as growth rebounds strongly from the recent coronavirus pandemic, with robust public finances and a restructured banking system that has shaken off the legacy of the country’s protracted financial crisis.
On August 20, Greece formally exited the European Union’s enhanced surveillance framework, the last vestiges of the 12 year-long crisis, and looks ready to return to investment grade in the months ahead. Meanwhile, official and private sector growth expectations are being revised higher with 2022 GDP growth forecasts now ranging from 4% to 5.7% − up from a range of 3% to 3.5% just a few months ago.
The Greek government is also outperforming its own fiscal goals. The latest data show Greece’s primary budget deficit narrowing sharply, providing the government with as much as a €2 billion cushion by year end to allow further tax cuts and subsidies. The state’s cash buffer now stands at approximately €42 billon.
Exports and foreign direct investment continue to set new records. This year’s tourism season has staged a strong comeback, while unemployment is at its lowest level in more than a decade. Greek stocks were recently upgraded in the FTSE Russell index.
And, after years of restructuring, Greece’s four big systemic banks are increasingly able to finance the country’s economic growth, setting the stage for further foreign and domestic investment. In their recent second quarter results, each of the four banks – National Bank, Eurobank, Alpha Bank and Piraeus Bank – met or surpassed market expectations and indicated improved financial performance ahead.
The revival in fortunes tracks the years-long effort by the banks to shed more than €100 billion in troubled loans, another vestige of the crisis, a process that is now largely complete. At the same time, Greek bank deposits have grown by €45 billion in the past three years.