Second Agency in a Week Raises Greece’s Rating to Investment Grade

Scope, the leading European provider for credit ratings, raised Greece’s rating to investment grade on Friday.

Scope upgraded Greece’s long-term local- and foreign-currency issuer and senior unsecured debt ratings to BBB-, from BB+, and revised associated outlooks to stable, from positive.

The move follows the Japanese rating agency Rating and Investment Information (R&I) which announced on Monday that it has raised the Greek economy rating to investment grade BBB-, with a stable outlook.

Bloomberg notes that Scope’s upgrade was widely expected by investors, who have been buying the nation’s bonds at lower yields than those of investment-grade peers like Italy, making them the euro area’s best performers this year.

Scope says that the upgrade reflects the sustained European institutional support for Greece, reflecting changes since the Covid-19 crisis to support vulnerable euro-area member states via monetary- and fiscal-policy interventions.

It also reflects a steady trajectory of decline in public debt, on the back of high inflation, above-potential real economic growth, low average interest costs of the prevailing debt portfolio and achievement of primary fiscal surpluses. Greece’s public debt to GDP ratio is expected to fall to 160.7% by 2023, a 46pp decline from the 2020 peak.

The rating agency adds that structural reforms that have meaningfully curtailed high non-performing loan (NPL) ratios and substantively enhanced banking-system stability.

So long as Greece stays compliant with Europe’s fiscal and structural-reform regulations, Scope views the Eurosystem as likely to support Greek markets in the future under adverse market scenarios – providing a much-needed financial backstop.

“The political stability secured after recent parliamentary elections strengthens government capacity for further adoption of necessary reforms. A prudent policy framework on aggregate reinforces Greece’s relationship with Europe, likely anchoring European support for at least the next four years,” Scope says.

R&I also raised Greece’s rating to investment grade

In its report upgrading Greece’s credit, R&I said that the Greek economy stays on a solid track despite the uncertain economic environment in Europe, and added that the primary balance has turned to surplus and the government debt ratio has fallen below the pre-pandemic levels.

“The election held in June 2023 gave the ruling party led by Prime Minister Kyriakos Mitsotakis a major victory that secured his second term under the parliamentary majority.

“The result has cemented the continuation of policies sought by the Mitsotakis administration aiming at the revitalization of the Greek economy and fiscal consolidation, raising expectations for strengthening the economic growth potential driven by investment and reforms as well as for continuous improvement in the government debt ratio,” R&I  said.

In May, Goldman Sachs said that Greece is “on the cusp” of regaining an investment-grade rating more than 12 years after Greece’s credit rating was impacted by the financial crisis.

According to Goldman Sachs, the second-largest investment bank in the world, Greece has been outperforming its peers in the euro area in terms of its rate of economic growth. Additionally, the country’s inflation rate is falling faster than in other European countries.

Goldman Sachs commented on Greece’s “remarkably strong” level of economic activity and dramatic turnaround in economic health since the financial crisis which rocked the county in 2009. The improvement in Greece’s investment grade rating may attract more long-term investors back to the country.