Fitch lowers Greece's 2022 GDP growth forecast

Failure to reduce government debt to GDP ratio in short-term could lead to negative rating action, agency says.

Fitch lowers Greece's 2022 GDP growth forecast

Fitch Ratings announced Friday it has lowered Greece's gross domestic product (GDP) growth forecast for 2022 to 4%, from its previous estimate of 5.3%.

The global rating agency said in a statement the downward revision is "due to a less positive carryover effect from 2021."

"Supply chain constraints in Greece’s main trading partners, and in domestic sectors more exposed to rising input costs, could constrain growth, as could an increase in coronavirus infections," the statement said.

"We have actually raised our 2021 deficit forecast to 10.0% of GDP from 9.5% at our July review due to higher estimates of the cost of the government’s support to the economy, which will outweigh the positive revenue impact from strong growth," it added.

Noting that government debt peaked last year to an estimated 205.6% of GDP, the agency warned that failure to reduce government debt to GDP ratio in the short-term could lead to a negative action in its next rating review in January 2022.

Fitch, on the other hand, said it revised up Greece's 2021 full-year GDP growth forecast to 6%, citing its economy completed four consecutive quarters of growth from second half of 2021 through first half of 2022.

"Annual growth was about 7% in first half of 2021 and real GDP returned to its pre-pandemic level in the second quarter," the statement said, adding "The GDP forecast change does not lower our 2021 fiscal deficit forecast."

"The sharp rise in exports has been offset by increasing imports," it noted.

Fitch said it expects economic growth to slow to 3.5% in 2023.