Fitch maintains Greece’s rating at BB, and its outlook as Positive

Fitch Ratings announced on Friday it has affirmed Greece’s credit rating at BB, which stands two notches below investment grade. The US agency has also maintained its Positive outlook about the country’s rating it had adopted at the previous rating action, on January 14.

“Greece has high income per capita that far exceeds both the ‘BB’ and ‘BBB’ medians,” noted Fitch in its report.

“Governance scores and human development indicators are among the highest of sub-investment grade peers. These strengths are set against still very high levels of nonperforming loans (NPLs) and very large stocks of public and external debt,” it pointed out.

“The Positive Outlook reflects a sustained expected decline in public sector indebtedness, in the context of still low average borrowing costs, despite the sharp rise in government bond yields this year. Greek banks have made substantial progress on asset quality improvement, sharply reducing the level of NPLs in the banking sector,” argued Fitch.

The agency’s report added that “government debt as a share of GDP declined to 193.3% by end-2021, and is projected to fall further to 171.6% by 2024, driven by improving primary balances and favorable growth-interest costs dynamics.”

It also noted that “the average maturity of Greek debt is among the longest of any sovereign, at around 20 years. Moreover the debt is mostly fixed rate, limiting the impact of market interest rate rises.”

Fitch further highlighted the faster-than-expected decline of the government deficit to 7.4% of GDP in 2021, from 10.2% of GDP in 2020, before decreasing at a faster pace in the next two years.

However Fitch has revised its Greek growth forecast to 3.5% this year from 4.1% previously and to 3.2% for 2023 from 4% previously owing to the Russian invasion in Ukraine.

Inflation is projected to slow down in the second half of the year from 12% in June, and average 7.3% for the entire 2022, before easing considerably to 1.8% in 2023 and 1% in 2024.

Fellow rating agencies Standard & Poor’s, DBRS Morningstar and Scope Ratings have taken Greece within one notch from investment level. Last month Japanese agency R&I also upgraded Greece to one notch off investment grade.

Greece has already completed 12 years off investment grade, and the government’s declared target is the emergence from the so-called “junk status” by 2023.

Greece also announced on Friday that on Monday, July 11, it will reopen its recent 10-year benchmark bond issue, that has an interest of 1.75% and matures in June 2032, so as to draw an additional 500 million euros from the market.