Investment grade bestowed
Government hopes the decision by Scope Ratings will be followed by the leading sector firms
The decision late on Friday by German credit rating agency Scope Ratings to upgrade Greek debt to BBB-, that is, investment grade, comes on the heels of a similar decision by Japanese firm R&I and provides hopes that the “big four” ratings firms recognized by the European Central Bank – Fitch, Moody’s, Standard & Poor’s and DBRS – will move in the same direction, bestowing an investment grade rating on Greece for the first time since 2010.
The market had already discounted the decision and bonds did not move significantly Monday.
Scope has a history of anticipating the dominant ratings firms’ moves. It was the first agency to upgrade Greek debt to BB+ in November 2021 and the first that mentioned a positive upside, in December 2022.
At least three of the “big four” will all update their ratings by the end of the year: DBRS on September 8, S&P on October 20 and Fitch on December 1.
The Ministry of Finance, commenting on Scope’s upgrade, said it was the result of the policies followed over the past four years of conservative rule that drove the debt lower despite successive global crises. Also, reforms were accelerated and funds provided by the EU absorbed efficiently.
Scope, for its part, said it upgraded Greek debt based on three factors:
First, the continuing support of European institutions that has made debt servicing sustainable and provides fiscal space for more public investment.
Second, the steady downward course of the public debt, which is forecast to reach 160.7% at the end of the year, down 46 percentage points from 2020. The debt is expected to drop to 141.6% of GDP in 2028, with GDP growth reaching 2.4% this year, 1.6% in 2024 and an average 1.3% from 2025 to 2028.
Third, the significant drop in delinquent loans that enhanced the banking system’s stability.
But public debt remains high and could lead to a risk reassessment, Scope warned. And debt maturity will become shorter.
Bank sector weaknesses persist, mid-term growth potential is mediocre, double-digit unemployment persists and long-term environmental challenges will constrain growth.
