Standard & Poor’s (S&P) credit rating agency upgraded Greece’s sovereign credit rating to BBB from BBB- on Friday, with a stable outlook.
S&P had first restored Greece’s credit standing as investment grade in October 2023 and revised the country’s outlook to positive in April 2024. It is now the third of five credit agencies recognized by the European Central Bank after Scope and DBRS to upgrade Greece within the investment grade class.
In its report, S&P notes Greece’s efforts to improve tax compliance, combined with resilient economic growth, which have enabled the country to continue overperforming fiscal targets.
“Despite the difficult external environment, in most scenarios, Greece will see further firm reductions in net debt to GDP; in our central scenario, we expect this ratio will fall by an average of 6 percentage points a year over the next four years,” it said.
The Public Debt Management Agency’s (PDMA) cash position provides Greece with an additional buffer, which at an estimated 15% of GDP covers close to three years of upcoming debt maturities.
“We could raise the ratings if Greece’s external imbalances were to substantially improve. For instance, this could happen if we saw a reduction in the economy’s import reliance. We could also upgrade Greece if we saw a material reduction in external debt, much of which is public,” the ratings agency said.
However, it added it could lower the ratings if Greece’s budgetary performance “were to materially deteriorate.”
S&P said Greece substantially outperformed its 2024 fiscal targets, its fiscal trajectory is well anchored, its economy is set to continue outperforming euro area peers, and the net government debt-to-GDP ratio shows a clear and continuing improvement.
Concerning US President Donald Trump’s tariffs, S&P said the risk to Greece was seen as manageable.
“Greece has only a small direct exposure to the US; direct goods exports are worth about 0.8% of GDP. That said, Germany and Italy, Greece’s most-important trading partners, are significantly more exposed to the impact of US tariffs. Greece’s manufacturing sector, which has been growing in importance in recent years, exports a significant volume of intermediate goods to neighboring countries, including Germany and Italy,” it said.
In addition, Greece’s shipping sector would clearly be negatively affected by reduced global trading volumes, although reexporting and rerouting strategies could be used to mitigate the total impact. “In any case, given its fairly low contribution to government revenue, a shock to the shipping sector is unlikely to meaningfully affect public finances.”
The credit rating agency noted it was upgrading Greece due to its “unwavering fiscal discipline” and said that the efforts to improve tax compliance, combined with its resilient economic drowth will allow Greece to continue overperforming its fiscal targets.
Deputy Premier and former Finance Minister Kostis Hatzidakis welcomed the upgrade, saying, “For me, personally, it is particularly important that S&P underlined the fiscal prudence that defines the government’s policy, as well as the recognition of the systematic effort in recent years to limit tax evasion.”
The further upgrade of the Greek economy within investment grade by S&P, particularly at a time of global turbulence and uncertainty, “is yet another proof of the international investment community’s confidence in the government’s economic policy,” he added.
National Economy & Finance Minister Kyriakos Pierrakakis noted that “Greece is dynamically returning to action, claiming one more step in investment grade.” The credit rating agency’s forecast for the Greek economy “justifies the government’s choices and the trust of citizens, who embraced our belief that fiscal stability provides the only safe way out from the multiyear economic crisis.”
Alternate FinMin Nikos Papathanasis noted that the international recognition of the measurable return of the economic policy will accelerate the reforms that society calls for and Greece needs, to bring more investments and job openings.
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