Greece has received a significant boost in its economic standing as Standard & Poorโs (S&P) upgraded the countryโs credit rating from BBB- to BBB, citing unwavering fiscal discipline and robust economic growth. This marks a pivotal moment for Greece, reflecting its recovery from a decade-long financial crisis.
Key Takeaways
- S&P upgraded Greeceโs credit rating to BBB, with a stable outlook.
- The upgrade is attributed to improved tax compliance and resilient economic growth.
- Greece’s GDP grew by 2.3% in 2024, outpacing many EU countries.
- The country has successfully reduced its net debt-to-GDP ratio.
- This is the third upgrade by a major credit agency in just over a month.
Economic Recovery and Growth
Greece’s journey from the brink of financial collapse to a stable economic environment has been remarkable. After experiencing a staggering 25% contraction in GDP during the crisis years, the country has rebounded with a focus on fiscal discipline and attracting foreign investment.
In 2024, Greece’s GDP growth reached 2.3%, surpassing many of its European counterparts, including Germany. This growth has been fueled by a resurgence in tourism and a revitalized manufacturing sector, which has become increasingly important in recent years.
Factors Behind the Upgrade
S&P’s decision to upgrade Greece’s credit rating is based on several key factors:
- Unwavering Fiscal Discipline: The Greek government has implemented strict fiscal policies that have led to consistent primary surpluses, excluding interest payments.
- Improved Tax Compliance: Efforts to combat tax evasion have resulted in better tax collection, contributing to the countryโs fiscal health.
- Debt Management: Greece’s Public Debt Management Agency has maintained a strong cash position, estimated at 15% of GDP, which provides a buffer against upcoming debt maturities.
- Positive Economic Outlook: S&P projects that Greece will continue to reduce its net debt-to-GDP ratio by an average of 6 percentage points annually over the next four years.
Government Response
The Greek government has welcomed the credit rating upgrade as a validation of its economic policies. Deputy Premier Kostis Hatzidakis emphasized the importance of fiscal prudence and the recognition of efforts to limit tax evasion.
National Economy & Finance Minister Kyriakos Pierrakakis stated that the upgrade reflects the governmentโs commitment to economic stability and growth, reinforcing the trust of citizens in their fiscal policies.
Future Prospects
While the upgrade is a positive sign, S&P has indicated that further improvements in Greece’s credit rating could occur if the country reduces its external imbalances and reliance on imports. Conversely, any significant deterioration in budgetary performance could lead to a downgrade.
As Greece continues to navigate the complexities of the global economy, the focus remains on maintaining fiscal discipline and fostering an environment conducive to investment and job creation. The recent credit rating upgrade not only enhances Greece’s attractiveness to investors but also signals a new chapter in its economic narrative, moving away from the shadows of its past crisis.
Sources
- S&P Upgrades Greece to โBBBโ on โUnwavering Fiscal Disciplineโ, GreekReporter.com.
- S&P: Greece upgraded to โBBBโ on โunwavering fiscal disciplineโ, eKathimerini.com.
- Greeceโs Rating Upgraded by S&P on Economic Strength, Bloomberg.com.
- S&P Global Ratings Lifted Greeceโs Creditworthiness Over Growth, The National Herald.
