Scope Ratings Agency Upgrades Greece’s Economy to BBB-

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Scope Ratings Agency upgraded this month the Greek economy to BBB- stable from ΒΒ+ a week after Japanese ratings agency R&I revised its rating to “investment grade BBB-” with a “stable” outlook.

“This is the second upgrade of the Greek economy to investment grade in a week, a development that further strengthens forecasts for an upgrade by the end of the year also by rating agencies recognized by the European Central Bank,” said the Greek Finance Ministry in a statement.

The rationale behind the decision includes strengthened European institutional support, the strong profile of public debt, fiscal outperformance, structural reforms, and NPL reduction.

However, according to Scope, rating challenges include very high government debt outstanding, “representing a continued contingent vulnerability during reappraisals of risk in financial markets on sustainability of debt of euro-area sovereigns”; banking-sector fragilities; inadequate growth potential, high unemployment, and a rigid labor market; and a weak external sector.

“We expect the economy to stay resilient this year, growing 2.4 percent, anchored by: i) private and public consumption; ii) investment surrounding the execution of Recovery Plan assignments; and iii) easing of supply-side bottlenecks,” said the report.

Source: SCOPE.

Looking ahead, Scope analysts expect the Greek economy to grow 1.6 percent next year, remaining above its medium-run rate of growth potential estimated around 1 percent.

“Growth is buoyed by prudent fiscal policy, adoption of structural reform, as well as a continued shift towards more investment- and export-oriented growth,” they said.

Other agencies expected to publish their reports in the coming period include DBRS (September 8), Moody’s (September 15), S&P (October 20), and Fitch (December 1).