DZ Bank: Greece’s return to investment grade in 2023 is entirely possible

Her Eleftherias Kourtali

Greece plans to recover its investment grade in 2023 with many small steps on the long road to this return to normalcy already in place, as noted in a report by DZ Bank, which considers this goal to be absolutely realistic.

While the economic landscape is full of uncertainties, with the spike in inflation and the war in Ukraine, Greece announced a new milestone in its fiscal consolidation last week, as it points out. It finally repaid its debt to the IMF earlier, while it is already beginning to repay the bilateral loans of the first memorandum, GLFs, totaling 50.1 billion euros (12.9% of Greek public debt).

The above developments, DZ Bank emphasizes, are part of a fundamental strategy of Greece. The country’s ambitious goal is to return at least partially to the investment level by 2023. By then at the latest, the country will have left behind the crises of the 2010s.

As DZ Bank emphasizes, the successes of Greece so far on the rating front are huge and they do not lack much to make the “jump” of the investment grade.

In the very early stages of the Greek crisis, the three major rating agencies have gradually downgraded Greece below the investment grade since April 2010, the firm said. However, the country reached an all-time low only in 2012 when S&P, Moody’s and Fitch put their ratings at (selective or limited) bankruptcy.

Since then, however, Greece has made significant progress. No other country within the eurozone can be proud of such an improvement in the rating profile. It is currently three steps away from the investment grade milestone based on Moody’s rating and two notches based on S&P and Fitch.

An upgrade to the investment grade would have numerous positive consequences for Greece as it would automatically mean that it has completely left behind the crises of the past years.

According to DZ Bank estimates, Greek bonds are expected to outperform Italian securities in the medium term. After DBRS placed Greece at the highest rating level for the country at the end of March with BB (high) and stable prospects, the next “lydia stone” has a date of April 22 where the S&P rating is expected. S&P has already given a positive outlook for the BB rating in April 2021, so DZ estimates that Greece could be upgraded to BB + (stable outlook) by the house.

Greece is thus getting closer and closer to the area of ​​investment grade. According to DZ Bank, Athens’ plans to recover the IG milestone by 2023 are quite realistic.

Greek bonds therefore have a significant margin limit that other issuers can not compete with. “Therefore, we continue to see Greek bonds as the strongest competitor of the Italians. In the medium term, we expect Greece to outperform Italy despite the fact that it has not (yet) achieved an investment grade rating”, DZ Bank emphasizes, adding that in contrast to Greece, Italy have much higher risks in terms of policy and refinancing.