International asset manager BlackRock painted a very rosy investment forecast for recession-battered Greece this week, referring to the country as “resurgent”, and that a successful recent market foray and pending review of the ongoing bailout “will unlock significant investment demand”.
Reuters quoted Chris Colunga, the co-manager of BlackRock’s Emerging Europe PLC, as saying that the Greek debt could “eventually” qualify for inclusion in the European Central Bank’s asset-buying stimulus plan “providing the government with a lower cost of debt and reassuring investors”.
Along those same lines, Goldman Sachs, in its European Economics Daily, in a post entitled “Greece — A macro framework for investors”, points to a stabilizing economy in the country, an over-performance in terms of fiscal targets but with only moderate growth rates foreseen.
Specifically, GS writes:
“We argue that developments in the Greek economy now take place within a broad macro-institutional framework that is more robust at absorbing destabilising shocks. The anchor of the system is the set of macroeconomic and institutional imperatives created by Greece’s large (but stable) public debt. Within this framework, nominal growth is likely to remain moderate, but (despite outstanding challenges in the Greek economy) take place in a lower-volatility environment.
“Primary surpluses are the most credible of the several available options for reducing the debt. Greece’s membership of the Euro area limits its ability to engineer inflation given the need to remain competitive, as does its large domestic output gap. Real growth is muted by challenges in the banking system, a high tax burden and the need for structural reform in labour markets and key productivity-enhancing sectors.
“Greece’s creditor institutions are therefore likely to monitor fiscal surpluses closely, but also deliver some debt relief in the near term, while remaining (implicitly) flexible in the long term. In turn, Greece has recently acted to demonstrate its credibility on this front by over-performing its fiscal targets. This dynamic creates a more stable institutional arrangement capable of absorbing larger economic shocks. In turn, this stabilises the macroeconomic outlook.”
