Greece's long-awaited recovery from its debt crisis took another significant step as Scope Ratings restored the country's investment-grade status. The upgrade comes after 13 years since Greece became the first euro-zone member to be downgraded to junk status. This development is seen as a vital milestone for the nation, which had to navigate through three international bailout programs, and it helps to put the debt crisis firmly in the past. It also comes shortly after the reelection of Prime Minister Kyriakos Mitsotakis, who has vowed to maintain sound state finances and continue with economic reforms.
Scope Ratings cited several factors that contributed to the upgrade, including a steady decline in public debt, high inflation, above-average economic growth, and low average interest costs. Additionally, the rating agency acknowledged the sustained support from European institutions, although Greece's credit ratings still face challenges due to high government debt. Investors were not surprised by the upgrade, as they have been showing confidence in the country by buying its bonds at lower yields compared to investment-grade peers like Italy. Greek bonds have emerged as the best performers in the euro area this year, marking a remarkable turnaround from the tumultuous past.
Although Scope Ratings' assessments are currently not recognized by the European Central Bank (ECB), there are expectations that the ECB may soon review their eligibility. It is anticipated that other rating agencies will follow Scope's lead in the coming months, and Mitsotakis has set the target of further rating upgrades by the end of the year. The Greek Finance Ministry expressed satisfaction with the upgrade and highlighted that it strengthens the prospects for future upgrades by ECB-recognized rating agencies.
DBRS Morningstar also commented on Greece's progress, emphasizing that the country is on the cusp of achieving an investment-grade rating. The rating agency highlighted the importance of implementing structural reforms, improving economic prospects, and committing to fiscal consolidation. Mitsotakis' plans to repay rescue loans ahead of schedule and reduce the debt-to-GDP ratio below 140% by 2027 have already attracted significant investor interest. Attaining investment-grade status will bring substantial benefits that have yet to be fully priced in, according to the Governor of the Bank of Greece, Yannis Stournaras.
Looking ahead, Mitsotakis has outlined his goals for his second term, which include reducing unemployment to 8%, increasing exports to 60% of GDP, and achieving annual primary budget surpluses of 2% to 2.5% of GDP. Scope Ratings also highlighted the positive impact of structural reforms that have reduced non-performing loan ratios and stabilized the banking system, as well as policies aligned with Recovery and Resilience Facility funding and the European Semester to stimulate investment and support recovery.
In conclusion, Greece's restoration of investment-grade status by Scope Ratings is a critical turning point for the country's efforts to rebuild its economy and regain international confidence. With further upgrades anticipated, Greece's prospects for growth and stability are looking increasingly positive.