Moody’s confirms Greece’s Ba3 rating, changes outlook to positive from stable

Wide divergence between Greece’s strong economic performance and the gradual increase in political instability, the latest report said.

Moody’s Investors Service (Moody’s) today changed the Greek government’s outlook to positive from stable and affirmed the local currency (LC) and foreign currency (FC) long-term issuer and LC senior unsecured ratings to Ba3. Moody’s has also affirmed FC senior unsecured shelf and MTN program ratings at (P)Ba3, LC commercial paper rating at Not Prime (NP) and FC’s other short-term rating at (P)NP.

The main drivers of the outlook change to positive are the prospect of a period of higher nominal GDP growth than in the past decade, partly as a result of improvements in governance and effective earlier economic and banking sector reforms that are more visibly bearing fruit. Together with a continued commitment to sound fiscal policy measures supported by the implementation of fiscal policy measures, higher nominal GDP growth will contribute to a significant reduction in Greece’s debt burden in the next few years.

The confirmation of Greece’s Ba3 rating reflects a balance between the improvements seen in many areas of Greece’s credit profile with persistent challenges. In particular, further reforms in the areas of justice, education, business environment and labor markets will support a higher assessment. Furthermore, the public debt burden remains very high and supported by official creditors, with future improvements and a full return to market-based financing implying the maintenance of large primary surpluses in the coming years.

Greece’s local and foreign currency ceilings remain unchanged at A3. For euro area countries, there is typically a gap of six notches between the local currency ceiling and the local currency issuer rating, and a zero gap between the local currency ceiling and the foreign currency ceiling, reflecting the benefits of the euro area’s strong common institutional, legal and regulatory framework as well as liquidity support and other crisis management mechanisms. It also reflects Moody’s view of de minimis exit risk from the euro area.

Copyright GreekCityTimes 2022


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