Green shoots in Greece
Corrects to say '20 basis points' in paragraph 5
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GREEN SHOOTS IN GREECE
Greece, which was once devastated by financial crisis, is on track to outperform the broader euro zone in the following year, analysts say, as it continues to follow through on its debt payments.
"We continue to think that the economy would be among the fastest growers in the euro area in 2025/26, and growth should outperform the regional average. Private consumption and capex are likely to remain the main GDP drivers," analysts at BofA Global Research said.
On the debt front, BofA says Greece is less exposed to high interest rates other European countries, given most of its borrowing is at low fixed interest rates. Furthermore, the government has been paying debt early, given its ample cash buffers and efforts to fight tax evasion.
Greek's debt/GDP ratio stands at over 160%. However, BofA says this should fall below Italy's by 2028 - which is currently at over 130%.
In mid-September, credit ratings agency Moody's revised its outlook on Greece to "positive" from "stable", since when spreads between 10-year Greek and benchmark German bonds DE10GR10=RR have narrowed by about 20 basis points to 81.2.
Yield spreads refer to the premium investors demand to hold Greek debt over German debt.
On the equities front, the stock exchange .ATG has gained over 6% so far this year, outperforming the benchmark STOXX 600 index .STOXX, while in terms of valuations, Greek stocks trade at a forward PE ratio of 7.5 vs the STOXX index's 13.1.
BofA notes a number of challenges remain for Greece. Inflation more than double than that of the broader euro zone. There is a labour shortage, alongside a large current account deficit and the country's judicial system is still in need of reform, which the bank says is hampering investment.
(Johann M Cherian)
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