S&P: Greece upgraded to ‘BBB’ on ‘unwavering fiscal discipline’

S&P Global Ratings on Friday raised its long- and short-term local and foreign currency sovereign credit ratings on Greece to ‘BBB’ from ‘BBB-‘, citing the country’s “unwavering fiscal discipline.” The outlook is stable.

The ratings agency was the first since the country’s debt crisis in 2010 to upgrade Greece to investment grade in October 2023.

In its report, S&P notes Greece’s efforts to improve tax compliance, combined with resilient economic growth, which have enabled the country to continue overperforming fiscal targets.

“Despite the difficult external environment, in most scenarios, Greece will see further firm reductions in net debt to GDP; in our central scenario, we expect this ratio will fall by an average of 6 percentage points a year over the next four years,” it said.

The Public Debt Management Agency’s (PDMA) cash position provides Greece with an additional buffer, which at an estimated 15% of GDP covers close to three years of upcoming debt maturities.

“We could raise the ratings if Greece’s external imbalances were to substantially improve. For instance, this could happen if we saw a reduction in the economy’s import reliance. We could also upgrade Greece if we saw a material reduction in external debt, much of which is public,” the ratings agency said.

However, it added it could lower the ratings if Greece’s budgetary performance “were to materially deteriorate.”

S&P said Greece substantially outperformed its 2024 fiscal targets, its  fiscal trajectory is well anchored, its economy is set to continue outperforming euro area peers, and the net government debt-to-GDP ratio shows a clear and continuing improvement.

Concerning US President Donald Trump’s tariffs, S&P said the risk to Greece was seen as manageable.

“Greece has only a small direct exposure to the US; direct goods exports are worth about 0.8% of GDP. That said, Germany and Italy, Greece’s most-important trading partners, are significantly more exposed to the impact of US tariffs. Greece’s manufacturing sector, which has been growing in importance in recent years, exports a significant volume of intermediate goods to neighboring countries, including Germany and Italy,” it said.

In addition, Greece’s shipping sector would clearly be negatively affected by reduced global trading volumes, although reexporting and rerouting strategies could be used to mitigate the total impact. “In any case, given its fairly low contribution to government revenue, a shock to the shipping sector is unlikely to meaningfully affect public finances.”

Source: pagenews.gr