Greek Economy

[nwoodman]

Greece continues to power ahead.  Hard to believe it is the shining light of Europe, but there you have it.

 

“Optimism about manufacturing’s prospect in the index of purchasing managers (PMI) reached 53.5 in July.”

 

“By contrast, the PMI in the 20 eurozone countries averaged 42.7, its lowest level since May 2020, at the height of the pandemic lockdown.

In Austria and Germany, for example, July PMI stood at 38.8 and was underwater in France 45.1 and Ireland 47.0.”

 

https://www.ekathimerini.com/economy/1217515/greek-industrial-production-expands-prospects-are-deemed-good/#

Edited August 19, 2023 by nwoodman

[nwoodman]

A recent interview with MS emerging market analyst Marshall Stocker on why Greece is their top holding

 

https://www.cnbc.com/video/2023/08/15/morgan-stanley-says-greece-is-its-top-holding-in-its-em-fund.html

 

[nwoodman]

Recent interview with Dennis Shen, lead analyst for Greece, after Scope Ratings’ (European Ratings Agency) upgrade of Greece to an investment-grade (IG) rating of BBB-.  Quite the feat.  In terms of risks moving forwards this response was interesting:

 

 

DS: Greece’s ratings are constrained at BBB- by several meaningful credit challenges. The elevated level of government debt remains a core challenge. High debt exposes Greece to ongoing risk whenever there is a pivot of market sentiment towards questioning the debt sustainability of the euro area’s more-indebted sovereign borrowers. Further reducing this debt could make Greece more resilient.

 

Furthermore, policy risks prevail as Greece transitions from dependence on conditional official-sector credit towards favouring less-conditional market-based funding. Thirdly, the banks and external sector display fragilities.

Another challenge is modest long-run potential growth of around 1%. Environmental challenges are relevant here as climate risk curtails long-run growth if heatwaves and wildfires damage Greece’s crucial tourism and agriculture sectors. A Bank of Greece-commissioned analysis from 2011 concluded climate change may cost the Greek economy anywhere from EUR 577bn to EUR 701bn by 2100. That is three times the size of the Greek economy today. Climate risk represents a meaningful long-run risk relevant for Greece’s ratings as the most exposed economy of the European Union.

 

https://www.fxempire.com/news/article/greece-qa-investment-grade-is-an-exceptional-achievement-but-multiple-challenges-remain-1368772

 

Link to Scopes upgrade note

 

https://www.scopegroup.com/ScopeGroupApi/api/analysis?id=097c203b-4b26-4fed-8117-b2086e3afdda

 

 

Bloomberg coverage

 

https://www.bloomberg.com/news/articles/2023-08-07/greece-and-its-banks-are-one-step-closer-to-wider-investor-pool?utm_campaign=socialflow-organic&cmpid%3D=socialflow-twitter-economics&utm_content=economics&utm_medium=social&utm_source=twitter#xj4y7vzkg

 

Edited August 19, 2023 by nwoodman

[petec]

On 8/19/2023 at 2:06 AM, nwoodman said:

Hard to believe it is the shining light of Europe

I mean, it's not a high bar!

 

Germany and France forced pro-market reforms on Greece that they'd never do at home. They're working. 

 

Thanks for the posts. 

[nwoodman]

After the horrendous fires this is a real kick in the teeth

 

“Torrential rains have flooded homes and roads in Greece. Storm Daniel has battered western and central parts of the country, prompting hundreds of calls to emergency services to pump out water”

 

https://x.com/reuters/status/1699082462754668929?s=61&t=DXjj7hLwsZeynV3C6VIPzA

 

“And it may only be getting worse for the region in the coming days. Weather forecasting site Severe Weather Europe says that Daniel could lead to the development of a medicane, a "tropical-like cyclone" in the Mediterranean. Weather models show such a system could form over the Ionian Sea this week, the forecasters said, as an ongoing marine heat wave fuels extreme weather. 

Medicanes usually need ocean temperatures of 26 degrees Celsius, just under 79 degrees Fahrenehit, to form, the forecasters said, and there has recently been "more than enough warmth in place to support the sub-tropical development." Weather models show that if it does form, it could bring wind gusts of roughly 62 miles per hour. It's unclear if it would be closer to Sicily and Malta or the Libyan coast. “

 

https://www.cbsnews.com/news/greece-historic-flooding-more-than-2-feet-of-rain-in-just-a-few-hours/

Edited September 5, 2023 by nwoodman

[glider3834]

Greece credit rating raised to investment grade for first time since debt crisis

https://www.ft.com/content/fc17f901-e219-4656-bb76-f088c84de3e7

Edited September 9, 2023 by glider3834

[glider3834]

https://www.bnnbloomberg.ca/investing/video/greece-will-stick-with-its-fiscal-targets-greek-pm-adviser~2764203

[maplevalue]

Greece named The Economist's country of the year: https://www.economist.com/leaders/2023/12/20/the-economists-country-of-the-year-for-2023

 

Quote

That leaves our winner, Greece. Ten years ago it was crippled by a debt crisis and ridiculed on Wall Street. Incomes had plunged, the social contract was fraying and extremist parties of the left and right were rampant. The government grew so desperate that it cuddled up to China and later sold its main port, Piraeus, to a Chinese firm. Today Greece is far from perfect. A rail crash in February exposed corruption and shoddy infrastructure; a wire-tapping scandal and the mistreatment of migrants suggested civil liberties can be improved.
 

But after years of painful restructuring, Greece topped our annual ranking of rich-world economies in 2023. Its centre-right government was re-elected in June. Its foreign policy is pro-America, pro-eu and wary of Russia. Greece shows that from the verge of collapse it is possible to enact tough, sensible economic reforms, rebuild the social contract, exhibit restrained patriotism—and still win elections. With half the world due to vote in 2024, democrats everywhere should pay heed.

 

[nwoodman]

1 hour ago, maplevalue said:

Greece named The Economist's country of the year: https://www.economist.com/leaders/2023/12/20/the-economists-country-of-the-year-for-2023

 

 

Well deserved and are likely to outperform over the next couple of years.  MS recently released their outlook for 24/25 and this forecast caught my eye:

 

 

While growth is forecast to slow they are still likely to be one of Europe’s top performers. They also had the following to say:

 

“Fiscal consolidation under way: Greece has returned to primary surplus already in 2023.
With the country's debt/GDP ratio at around 170% of GDP as of end of 2022, fiscal
consolidation is a priority for the government. We expect the government to converge to
a 2% primary surplus already in 2024. Debt/GDP should remain on a downward trajectory,
reaching 148% of GDP by the end of 2025 on our forecast. Even if interest rates remain
elevated, the debt comprises mostly institutional loans at a fixed rate, making its interest
rate bill less sensitive to interest rate increases.

 

Back to investment grade: After more than a decade, Greece returned to IG (DBRS and
S&P). Moody’s and Fitch remain below IG, and we think that it will only be a matter of
time before the two agencies also move to IG, the latest in 1H24, in our view. One of the
more immediate benefits of IG status will be Greece's inclusion in indices as well as
eligibility under the ECB’s collateral framework, and hence for ECB asset purchases.
Current rules, with the exception of PEPP, list that a government bond needs to hold IG
status from at least one of DBRS, S&P, Fitch and Moody’s. The upgrade of Greek
government bonds to IG should also have positive spillovers onto the Greek economy by
lowering the country’s cost of borrowing as well as by attracting more investment.”

 

 

Non- paywalled link to the Economist Article

https://archive.is/dx5Qj

YEARAHEAD_20231112_2100.PDF

[nwoodman]

MS released their European outlook for 2025/2026:

 

Overview Summary of the 2025 European Economic Outlook:

 

The Euro area is expected to experience modest growth, stabilizing close to potential levels at 1.0% in 2025 and 1.1% in 2026. Private consumption will strengthen, supported by real income gains and declining household saving rates. Investment is forecasted to rebound as monetary policy eases, but fiscal consolidation and trade tensions will act as drags on growth. Inflation is predicted to fall below the European Central Bank’s (ECB) 2% target, leading to further rate cuts. Risks include potential global downturns, geopolitical tensions, and domestic political uncertainties.

 

 Focus on Greece:

 

Growth:

 

• Greece is set to remain a standout performer in the Euro area, with growth projected at 2.2% in 2025 and slightly lower at 2.0% in 2026.

• The robust performance will be driven by a combination of:

• Strong investment flows from EU recovery funds.

• A resilient tourism sector, continuing to bolster economic activity.

• Structural reforms and improvements in fiscal management implemented over the past decade.

 

Inflation:

 

• Inflation in Greece will mirror the broader Euro area trend, declining steadily over the forecast period. However, wage growth may remain slightly elevated due to tight labor markets, preventing a more rapid fall in inflation.

 

Trade and Fiscal Policy:

 

• Greece’s economic trajectory is supported by improved trade balances, with strong export performance in services like tourism and shipping.

• Fiscal consolidation continues but at a less restrictive pace compared to earlier years, allowing for some domestic stimulus to support growth.

 

Risks:

 

• Greece remains vulnerable to external shocks, such as:

• A potential slowdown in global trade or tourism.

• Rising geopolitical tensions in the Eastern Mediterranean region.

• Domestic challenges include maintaining the momentum of reforms and ensuring the effective deployment of EU recovery funds.

 

Outlook:

 

Greece is expected to remain one of the fastest-growing economies in the Euro area, leveraging its EU recovery fund allocation, improved fiscal health, and strong export sectors. However, external vulnerabilities and the need to sustain structural reforms are critical to maintaining this trajectory.

 

 

YEARAHEAD_20241117_2200.pdf