By Tasos Dasopoulos
Another “surprise” upgrade of the country’s credit, one notch below the minimum investment grade, is expected on Friday, July 8, by the third largest rating agency, the US Fitch.
The information reaching Athens in the last few days wants the third largest rating agency to do on Friday what it did not do in January, during the first evaluation of the economy for 2022: to proceed with the upgrade of the economy’s credit rating by one level from BB to BB+, while changing the outlook on the economy from “positive” to “stable”.
This development is supported by the V-type recovery of the Greek economy, with growth that reached 8.3% in 2021, the unexpected increase in GDP by 7% in the first quarter of 2022 and the prospect of exceeding 3% on a yearly basis. It will also help that the debt-to-GDP ratio fell from 206.3% in 2020 to 193.3% in 2021 and will further decelerate to 185% in 2022.
The prerequisites for the upgrade, as stated by Fitch itself in the January report when it had only upgraded the outlook for the economy from “stable” to “positive”, complement two other elements: The first is that the fiscal outcome for 2021 was significant better than expected as both the fiscal and the primary deficit were lower than expected by 2% of GDP. For this year, they are expected to decrease further by 3% of GDP, while for 2023, the goal is for the Greek economy to return to a primary surplus.
The second, equally important, is that the percentage of bad loans fell from 12.1% at the end of the first quarter of the year with the prospect of further decreasing, in single digits, until the end of the year.
So far, the upgrades of Greece’s credit rating one place below investment grade, are two from large houses, which are also accepted by the European Central Bank, but also from two smaller ones.
Standard & Poor’s (BB+) upgraded Greece from the “majors” last April and DBRS (BB High) in March. Among the smaller houses, we had on June 20 the upgrade of the economy to grade BB+ by the Japanese house R&I and much earlier in September 2021, by the German rating house Scope Ratings.
The only agency that has “frozen” its ratings for Greece since November 2020 is Moody’s, which has since kept Greece at the Ba3 level, i.e. three levels below the minimum investment grade.
Achieving the minimum investment grade (BBB-) has been designated as a national goal for Greece. In this direction, since the beginning of the year, Greece has taken two important steps. In April, it repaid the balance of its 1.8 billion International Monetary Fund loans two years ahead of schedule, and has already secured the support of the Eurogroup and its biggest creditor, the European Stability Mechanism (ESM) for its exit from the regime of enhanced surveillance on 21 August.