Unchanged at BBB- with a stable outlook, the German credit rating house, Scope Ratings, left Greece’s credit rating unchanged, which was the first to give Greece investment grade last August.

Scope, which has recently been accepted by the European Central Bank, says it has not re-rated Greece after its six-monthly review to see if there have been any changes that would have an impact on the credit rating.

The house notes that the assessment in the context of the six-monthly monitoring is not a credit assessment nor does it indicate the possibility that it will proceed to a credit assessment in the short term.

With reference to the main factors of Greece’s rating, it states that the BBB- rating is supported by many strong credit data.

First, the increased institutional support of Europe after the Covid-19 crisis, in the form of impressive interventions in monetary and fiscal policy that show a more durable monetary support of Greece.

Greece’s achievement of investment grade has strengthened the stability of the Eurosystem’s support for Greek bonds.

In addition, the general government debt-to-GDP ratio and the general government deficit have been on an improving trajectory in recent years, boosted by the economic recovery and rising inflation along with the re-achievement of a primary surplus.

Finally, structural reform policies have reduced NPL ratios, increased the stability of the banking system and mobilized private investment, reducing bottlenecks associated with the weaknesses of the Greek banking system and compensating for historically low private investment.

Scope expects the Greek economy to have a comparatively strong growth of 2.2% in 2024 and 2.3% in 2025 against an estimated growth of 2.1% last year. Household consumption is expected to remain robust amid easing inflationary pressures and strengthened labor market performance, while the recent easing of financial conditions is expected to support an increase in investment.

A more favorable international environment, including a recovery in demand from its European trading partners, is also expected to underpin the economy’s medium-term growth prospects.

The debt-to-GDP ratio is expected to decline to around 140% in 2028 (from 160% estimated at the end of 2023), underpinned by sustainable primary surpluses for the coming years, which will largely offset parallel growth of the burden of interest payments.

Scope reports that Greece’s credit rating is constrained by:

First, the debt is still high. A gradual weakening of the favorable debt structure may pose a challenge in the medium term. This is because Greece is financed by the private markets, which increases the average cost of financing, reduces the average duration of debt and gradually increases the ratio of private debt.

Second, weaknesses remain in the banking sector.

Finally, structural economic weaknesses such as a subdued medium-term potential growth rate, high (albeit rapidly falling) unemployment, a weak external sector and long-term environmental challenges are credit constraints.

The stable outlook reflects Scope’s view that the risks to the ratings remain balanced.

A.H.