By Natasa Stasinou

 

The absorption of the Recovery Fund resources will remain the major support of the Greek economy in the next two years, according to UBS.

 

The Swiss investment bank remains quite optimistic about the course of the Greek economy, despite the climate of international uncertainty, while praising Athens for achieving high primary surpluses and significantly reducing its public debt.

 

In particular, in its report for the Europe, Middle East (EMEA) region, which coincided with the submission of the draft budget to Parliament, it estimates that the Greek economy will grow at an average rate of 2.6% in 2025-2026. For next year, it expects GDP growth of 2.8% (raising the estimate compared to the official estimate of the Greek government), while it "sees" a slowdown to 2.3% in 2026. For this year's growth rate, UBS's estimate stands at 2.5%.

 

As it explained in its report for the next two years, growth rates will be supported by EU resources with financing and loans of the Recovery Fund reaching 4% of GDP in 2025 and 4.6% in 2026 from 2.3% in 2024. Fixed investment is expected to increase by 8.5% in the next two years, compared to a growth rate of 5% in the two years 2023-2024. "Of the 10 billion euros in loans that Greece has received, only 5.4% (55%) have already been absorbed, which means that there is still considerable room for improvement. The total amount is expected to reach 12.4 billion euros. In addition, household consumption will benefit from further increase in employment and higher real income. For 2025, the GDP forecast is 80 basis points higher than the international consensus of analysts and for 2026 it is 30 basis points higher."

 

Primary surplus and debt

 

Regarding the primary surplus, UBS considers it feasible to achieve the targets of 2.4% and 2.5% of GDP respectively in the next two years. These fiscal performances will allow the debt-to-GDP ratio to be reduced to 140% by 2026.

 

The positive fiscal performance is supported by tax revenues that exceed the target and efforts to curb tax evasion.

The two sides of the Greek economy

 

In response to a question raised by Naftemporiki.gr, UBS said on Thursday, during a webinar, that in an environment of sluggish European growth, the Greek economy "has its own dynamics" thanks to the generous resources of the Recovery Fund and another important asset: it primarily exports services (i.e. tourism) and not products

 

But why do the rating agencies see success stories and miracles in Greece? Because they measure very specific indicators: GDP growth rate, inflation, public debt, fiscal deficit and primary result.

 

These indicators tell the story of a Greece that is growing much faster than the big three in the Eurozone (which is partly due to the fact that its GDP had sunk during the decade of the crisis and therefore had room for leaps), that is leading the way in reducing debt (although this is still by far the highest) and that is showing primary surpluses – higher even than what it has promised.

 

This last development is considered rather positive for the rating agencies. For ordinary households, however, this is not the case. Because higher tax revenues and primary surpluses come mainly from two taxes: VAT and ENFIA – both of which disproportionately burden the middle class.