S&P upgrades Greece to investment grade for first time since 2010 crisis
It raised late on Friday the country’s local and foreign currency long-term issuer ratings to “BBB-/A-3,” with a stable outlook, citing stronger budgetary position.
The one-notch upgrade, from BB+ to BBB-, is expected to significantly boost market confidence in the Greek economy, attracting investment and lowering borrowing costs. The government hailed it as a major success.
The other two agencies, Fitch and Moody’s, rate the country one notch below investment grade. DBRS Morningstar upgraded Greece’s rating to investment grade BBB (low) last month.
Standard & Poor’s said it expects budget surplus target to help in paring the country’s government debt, and added that it is cautious about political pressures hindering Greece’s ability to sustain large primary budget surpluses.
Greece lost its investment-grade credit rating, which implies a low risk of default, in 2010 when its decade-long debt crisis erupted, forcing it to sign up for international bailouts worth about €260 billion to stay afloat.
It emerged from the debt crisis in 2018 and was the only country in the eurozone with a “junk” rating.
“Supported by a very rapid economic recovery, the Greek government has been able to regularly outperform its own budgetary targets despite gradually increasing social transfers,” S&P said.
S&P expects “additional structural economic and budgetary reforms, coupled with large EU funds, will support robust economic growth in 2023-2026.”
Greece expects economic output to rise 3% in 2024 following a 2.3% expansion this year more than twice the eurozone average. It also projects a 2.1% of GDP primary budget surplus next year on higher investment and strong tourism revenue.
The conservative New Democracy government hopes now that the upgrade will trigger more capital inflows and reduced borrowing cost for the country’s businesses.
Finance Minister Kostis Hatzidakis hailed the S&P upgrade late Friday, while pledging to maintain prudent budgetary policies.
“The country faces a historic window of opportunity through a combination of the right economic policy mixture with political stability,” he said.
Greece’s 10-year government bond yield was at 4.38% on Friday, about 58 basis points below Italy’s equivalent .
“I think all the ratings specific news is priced in. It’s trading as investment grade anyway,” Rabobank senior rates strategist Lyn Graham-Taylor told Reuters.
