BoG Gov. Stournaras: Restored investment grade will lure more FDIs to Greece

Influential Greek central banker Yannis Stournaras said a restoration of an investment grade rating for the country is a major challenge, while sticking to his prediction that such an upgrade will occur this year.

Speaking during an interview with Econostream, the Bank of Greece (BoG) governor noted that the re-elected Mitsotakis government appears determined to proceed with the necessary economic reforms.

One benefit of a regained investment grade, as he said, will be a partial mitigation of the negative impact on Greek businesses and households from successive interest rates taken by the ECB.

He explained that “…only 10 percent of funds can invest in a territory without an investment tier. Consequently, there is a lot of room for new foreign direct investment or financial investment once the country achieves investment grade. Many more funds will be willing to invest in the Greek economy”.

Referring to the latter, he said it was entering a phase of higher growth compared to the European average, while at the same time, Greece’s public debt to GDP ratio is dropping.

Returning to interest rates, he forecast that another hike will not come in September, saying “there are signs that the economy is weakening. The ECB’s baseline macroeconomic scenario predicts positive growth, but it appears that this may not be the case.”

However, in response to an interest rate hike this month, July, he said “we rely on the data, we have to look very carefully at the data in July, especially the weakening of economic activity”, while at another point of his interview he adds “Given that it now appears that the data points to a weaker economy than our baseline forecast, yes, we have to be very, very cautious, even in July.”