(Bloomberg) -- Greece’s rating status was upgraded by Scope Ratings, which cited strong growth and declining debt as the main drivers.
The ratings firm on Friday raised Greece’s long-term sovereign rating to BBB from BBB-, while adjusting the outlook to stable from a previous positive, according to a statement.
“Declining public debt, improved banking-system resilience and stronger trend growth drive the upgrade,” Scope said. The continued focus on budgetary prudence “provides Scope with an increased confidence in the ability of government to achieve and sustain elevated primary-surplus objectives ahead of the next general elections barring unforeseen crises,” the credit assessor added.
The decision comes as the country enjoys investors’ trust, with yields trading below Italian and at about the same level as French bonds. Greece has significantly reduced its debt pile since the pandemic and expects borrowing to output ratio to further decline to 133% of gross domestic product by 2028 from the highs of 212% in 2020.
“The return of the Greek economy to normality signals better financing conditions for the public and private sectors, a boost in investments, new jobs and better wages,” Greek Finance Minister Kostis Hatzidakis said in a statement following Scope’s upgrade.
In August 2023, immediately after the reelection of Prime Minister Kyriakos Mitsotakis, Scope lifted Greece to the investment-grade territory, a status lost in 2010 when the country got its first bailout program. That upgrade was one of the first of its kind and was followed by a round of similar decisions by other agencies apart from Moody’s Ratings. Scope now may be starting a new cycle of potential upgrades.
Mitsotakis in November revealed his intention to keep repaying bailout loans ahead of schedule. The plan sees an early repayment of at least €5 billion ($5.3 billion) in 2025 of long-term obligations that mature from 2033 to 2042, Mitsotakis said at a Bloomberg event in Athens.
The government has pledged to keep achieving high primary surpluses — a measure of revenue minus spending, excluding interest payments — targeting a sustainable figure of around 2.5% of GDP in the coming years. The country’s financing needs are also low, with the finance ministry aiming to raise as much as €8 billion through new bonds in 2025.
“Still-elevated government debt and structural economic weaknesses remain credit constraints,” Scope said.
(Updates with finance minister comment in fifth paragraph.)
©2024 Bloomberg L.P.