Moody’s Upgrades Athens Outlook to Positive from Stable

The Hellenic Parliament overlooking Syntagma Square in Athens. Photo © Greek Travel Pages

International credit agency Moody’s upgraded the City of Athens outlook this month to positive from stable, reflecting a vote of confidence in the Greek capital’s financial prospect, said the Athens Municipality.

This rating comes after Moody’s decision to change the outlook for Greece to positive from stable earlier this month.

The revised outlook reflects the City of Athens’ good budgetary planning, low debt burden and good liquidity profile, which are expected to continue in the following years, it said.

Moody’s said it expects Athens will also benefit from reduced systemic risk, as captured by the change in outlook on Greece’s rating of Ba3 to positive from stable.

“The ongoing improvements in the sovereign fiscal position, institutional quality and level of supervision of regional and local governments, if they continue, will translate into greater predictability of government transfers, which account for around 26 percent of the city’s operating revenue,” said the report.

The city’s debt management is robust. Athens’ debt burden is low at around 23 percent of its operating revenues at year-end 2022, down from 26 percent in 2021.

Moody’s expects the city’s debt stock to remain low over the medium-term, at around 20 percent of operating revenue by 2024. The city’s liquidity profile is good with abundant cash to cover its annual debt service until 2024, thus limiting refinancing risks.

Commenting on the news, Athens Mayor Kostas Bakoyannis said city planning and actions were paying off, including “small and large infrastructure projects and reduced municipal fees”.

Athens Mayor Kostas Bakoyannis. Photo source: Athens Municipality.

“With proper planning, we increased municipal revenues to a historic level – over 1 billion euros – and we are ‘returning’ the good result to the Athenians. With small and large infrastructure projects throughout the city but also with the horizontal reduction of 5 percent of municipal fees… we are continuing,” said Bakoyannis.

According to local Athens government, municipal revenues this year are expected to exceed 1 billion euros, investment activity to grow by 153 percent and financed projects to reach 510 million euros, mainly from EU and national funds.

Athens authorities attribute the city’s performance to its economic strategy as well as to the efficient utilization of EU resources for important infrastructure projects.

On the downside, the city’s Ba3 rating also reflects its limited financial flexibility, with expenditures being largely decided by the sovereign, including personnel costs and capital spending, said the report.

“The City of Athens has a fragile socio-economic profile, including increased emigration over the last decade, with a negative impact on labor market,” it said.

Photo source: Athens Development and Destination Management Agency

After two years of lower tax revenue and higher expenditure due to the coronavirus pandemic, the city has recovered pre-pandemic positive operating balances of around 2 percent of operating revenue in 2022, reflecting higher tax revenue. Athens is expected to continue to record positive operating balances and financing surpluses until 2024, reflecting the city’s self-imposed fiscal discipline, higher revenue collection and controlled spending.

Lastly, Moody’s said it expects Athens to gradually increase its capital expenditure in line with its investment program (such as recycling waste, green areas or the renovation of the city’s theater).

Moody’s upgrade of the Athens Municipality is the second in the last three years. In November 2020, the credit agency upgraded Athens from B1 to Ba3, acknowledging the city’s good management, transparency and prospects.