DBRS affirms Greek rating, expects pensions compromise

Canada-based rating agency DBRS confirmed late on Friday Greece’s credit rating at B (high) and maintained a Positive trend, in its first review after the end of the bailout program in August. It does highlight that a return to the markets is necessary, along with more progress in the economy.

In a statement DBRS noted that Greece’s gross domestic product growth “has been more skewed than expected toward the external sector, but some rebalancing toward domestic demand is expected in coming quarters.’

It estimated growth to amount to 2.1 percent his year, against an official forecast for 2 percent and up from 1.5 percent in 2017. DBRS further expects the economy to expand 2.5 percent next year.

“Budgetary performance is sound and we expect the target for 2018 to be exceeded. Nevertheless, further sustained progress is needed, and Greece has yet to fully return to the markets,” the statement points out.

DBRS says it expects a compromise between Athens and its creditors on the pension cut by year-end: “The authorities have presented two scenarios for the general government primary surplus in the 2019 draft budget. The base case generates a 4.2 percent primary surplus and an alternative scenario 3.6 percent, close to the current target. DBRS expects a decision on the budget scenario by year-end, and a compromise solution to emerge.”

“DBRS’s decision to maintain a Positive trend reflects the likelihood that Greece will continue its reform path in the post-program period. DBRS anticipates evidence to emerge of compliance with the Enhanced Surveillance mechanism and a gradual return to market funding. A European Commission positive assessment under the Enhanced Surveillance should activate the contingent debt measures and could also support efforts to restore confidence in capital markets,” the Canadian agency states