Scope Upgrades Greece’s Debt to BBB, Outlook Stable

Photo source: This is Athens

Scope Ratings has upgraded Greece’s long-term issuer and senior unsecured debt ratings to BBB from BBB-, while revising its outlook to stable.

This reflects Scope’s view that the risks surrounding Greece’s rating are balanced over the next 12 to 18 months.

Scope’s upgrade is based on expectations of continued debt reduction relative to GDP in the coming years. However, the agency highlights that “elevated government debt and structural economic weaknesses” still present challenges to Greece’s credit profile.

According to Scope, the resilience of Greek banks has notably improved, driven by the reduction of non-performing loans (NPLs) and the privatization of systemic market players.

The agency stated: “Greek banks have greatly improved in reducing non-performing loans, from 49.2 percent of the total in June 2017 to just 6.4 percent in June 2024.” In comparison, the EU average for NPLs was 1.9 percent in Q3 2024.

The Greek economy is forecast to grow by 2.2 percent annually in 2024 and 2025, with an average of 1.6 percent per year between 2026 and 2029.

According to Scope, this growth trajectory is expected to mitigate the risk of another economic downturn.

Scope’s report also highlights structural reforms, new investments, and European institutional support as key drivers for the continued development and sustainability of the Greek economy.

Additionally, Greece’s debt-to-GDP ratio has significantly decreased since 2020, from 212.6 percent to 155.3 percent in 2024—lower than pre-pandemic levels of 185.5 percent in 2019.

The agency expects this momentum to continue, forecasting a gradual reduction of public debt as a percentage of GDP.

“This decline is supported by favorable debt dynamics, alongside stronger-than-anticipated primary fiscal surpluses and a narrowing of the headline budget deficit,” the agency said.

Greece’s debt-to-GDP ratio is expected to fall to 145 percent by 2025 and 132 percent by 2029.

In its medium-term projections, Scope anticipates primary surpluses of 2.75 percent between 2024 and 2027, an improvement over its previous forecast of 2.4 to 2.5 percent.

Minister Hatzidakis on Greece’s upgrade

In an announcement, Greek Finance Minister Kostis Hatzidakis emphasized the significance of this upgrade for three key reasons:

– It is the first upgrade of Greece’s investment rating since the financial crisis, marking the country’s progress toward advanced economies.
– It comes amid global tensions, when even strong economies are facing downgrades.
– It proves that Greece’s public and economic policies are moving in the right direction, particularly ahead of the 2025 general budget discussion in Parliament.

Greek Finance Minister Kostis Hatzidakis

Minister Hatzidakis added that Greece’s upgraded investment rating will create more favorable funding conditions for both the public and private sectors, boosting investment, job creation, and wage growth.

Scope initially assigned Greece an investment-grade rating on August 4, 2023, and later, on July 4, 2024, upgraded the country’s outlook to positive from stable.