Greece Receives Investment Grade Rating Upgrade by S&P Global
Greece’s Economic Recovery Strengthens with Investment Grade Rating
S&P Global has become the first of the “big three” rating agencies to upgrade Greece to investment grade since the country’s debt crisis in 2010. The local and foreign currency long-term issuer ratings have been raised to ‘BBB-/A-3’, with a stable outlook, citing a stronger budgetary position. This upgrade marks a significant milestone in Greece’s economic recovery.
Positive Outlook for Greece’s Economic Growth
While Fitch and Moody’s rate Greece one notch below investment grade, S&P’s positive outlook is driven by expectations of a budget surplus target that will help reduce the country’s government debt. S&P also remains cautious about political pressures that may hinder Greece’s ability to sustain large primary budget surpluses. However, the agency believes that additional structural economic and budgetary reforms, along with substantial EU funds, will support robust economic growth in the coming years.
Greece Emerges Stronger from the Debt Crisis
Greece, which was the only country in the eurozone with a “junk” rating, lost its investment-grade credit rating in 2010 during the decade-long debt crisis. However, the country emerged from the crisis in 2018 and has since made significant progress in improving its economic standing. The recent upgrade by S&P reflects Greece’s continued efforts to stabilize its economy and regain investor confidence.
Anticipated Benefits of the Rating Upgrade
The Greek government expects that the upgrade will attract more capital inflows and lead to reduced borrowing costs for businesses. This is likely to result in increased investments and improved financial conditions for companies operating in Greece. Additionally, the upgrade may also lead to inflows from index-tracking funds and an upgrade in banks’ assets, further bolstering the country’s economic prospects.
Optimism Surrounding Greece’s Economic Outlook
Greece anticipates a 3% rise in economic output in 2024, following a 2.3% expansion this year, which is more than twice the eurozone average. The government’s projections also indicate a 2.1% of GDP primary budget surplus next year, driven by increased investment and strong tourism revenue. These positive indicators, coupled with the investment grade rating, position Greece for continued economic growth and recovery.
Positive Market Response to the Upgrade
Following the rating upgrade, Greece’s 10-year government bond yield was at 4.38%, approximately 58 basis points below Italy’s equivalent. Market experts believe that the news of the upgrade has already been priced in, as Greece has been trading as an investment grade country. The rating upgrade is expected to have a further positive impact on Greece’s borrowing costs and overall market performance.
With Greece’s economic prospects on an upward trajectory, the investment grade rating from S&P Global marks a significant milestone in the country’s recovery journey. The upgrade is likely to attract more investments, boost business growth, and further strengthen Greece’s position in the global economy.
