Moody’s announced on Friday the maintenance of the credit rating of the Greek economy at Ba1 with stable prospects.
Government sources commented that the reason why Moody’s did not award – as other rating agencies have already done – the investment grade, the answer is simple: Moody’s had upgraded the Greek economy, by two notches just six months ago, on September 15, 2023. Further upgrade was not expected in such a short period – the established practice of rating agencies is to allow a reasonable time interval between upgrades, both in terms of assessment and outlook.
Moody’s is the last agency from which we expect the investment grade, which has already been awarded to the Greek economy by Standard and Poor’s, Fitch, DBRS, R&I, and Scope. The benefits of the upgrade are already visible in the cost of public borrowing and in the narrowing spreads, which are already at levels lower than other Eurozone countries.
The main message from Moody’s report is that: a prerequisite for an upgrade to investment grade is the continuation of the government’s policy for fiscal stability on the one hand, and acceleration of reforms on the other.
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Moreover, the agency highlights the significant progress made in the past years in seven different sectors, specifically noting:
- Growth: This was at 5.6% in 2022 and despite the slowdown to 2% in 2023, mainly due to persistent inflation and interest rates, Moody’s predicts a real GDP increase of 2.4% in 2024 and 2.3% in 2025, supported by domestic demand, exports, EU funds, and private investments.
- Fiscal deficit: It was quickly reduced to less than 1% of GDP in 2023 from 2.4% in 2022 (according to the agency’s estimates, as official data from ELSTAT have not yet been announced). Moody’s predicts that the fiscal deficit will stabilize at 0.9% of GDP in 2024-25, while primary surpluses will be around 2% of GDP.
- Public debt: It is estimated at 161% of GDP at the end of 2023, from 172.6% in 2022, and further reduction is projected to 148% by the end of 2025.
- External balance: Moody’s notes the decrease in the current account deficit from 6.4% of GDP in 2023, from 10.3% in 2022.
- Inflation: Further decrease is expected to 2% in 2024-2025.
- Non-performing loans: The “significant reduction” of NPLs in recent years is highlighted.
- Reforms: Moody’s notes that the continuation of reforms that improve the functioning of Greece’s labor and product markets and achieve fiscal primary surpluses can yield greater than expected positive results.
In conclusion, Moody’s analysis records the significant progress made by the Greek economy and anticipates a continuation of positive economic developments.