Fitch Ratings: Greek budget data shows commitment to fiscal consolidation

Greece’s second-consecutive budget surplus demonstrates the authorities’ continuing commitment to fiscal consolidation, Fitch Ratings said on Thursday.

This supports Fitch’s expectation of improving debt sustainability in Greece, although how far and how fast public debt will fall will largely be determined by the nature of the debt relief currently under discussion by Greece’s international creditors, the credit agency said in a statement.

The latest figures show that Greece’s budget surplus hit 0.8 percent of economic output in 2017, up from 0.6 percent a year earlier, representing significant fiscal outperformance by Greece.

“We think primary surpluses may fall below these targets beyond 2020, but we still believe gross general government debt (GGGD) peaked in 2016 and will fall more rapidly from next year, reaching 137% of GDP by 2025, assuming annual average nominal GDP growth of 3.5%, but not factoring in any future official sector debt relief,” Fitch said.

“Our baseline assumption sees GGGD falling further, to 132.8% of GDP in 2026. This would still be higher than the current level for Italy – the eurozone’s second most-indebted sovereign – although the concessional nature of Greece’s public debt means that debt servicing costs are low,” it added.