Greek economy: Upgrade to investment grade by the Japanese R&I ratings agency

The Japanese rating agency Rating and Investment Information (R&I) upgraded today, July 31, 2023, the Greek Government’s debt to investment grade, BBB- with a stable outlook (from BB+ with a stable outlook previously).

The evaluation report released today highlights six positive developments that led to the upgrade, namely:

1. The great victory of the ruling party led by Prime Minister Kyriakos Mitsotakis in the June elections, a result that ensures the continuation of policies aimed at revitalizing the Greek economy and fiscal consolidation and increases expectations for strengthening growth with investment as a driving force and reforms, as well as for continuous improvement of the public debt ratio.

2. The strong growth (5.9%) of the Greek economy in 2022, above the eurozone average, and the forecasts of the government and the European Commission for growth of 2.3% and 2.4%, respectively, in 2023.

3. The progress in disposal of non-performing exposures (NPEs) through the use of securitizations which took the banks’ NPE ratio to single digits.

4. The improvement of the fiscal balance after the large deficit recorded due to the COVID-19 pandemic. A small primary surplus was recorded in 2022, despite subsidies to businesses and households to counter rising inflation and energy prices. The government for 2023 forecasts a primary surplus of 1.1% of GDP (and a reduced fiscal deficit of 1.8% of GDP) while the European Commission forecasts an even larger surplus. “Under Prime Minister Mitsotakis, who secured his second term, the government is expected to maintain its disciplined fiscal policy. The agency believes that the increase in government spending will be controlled and that the primary balance will remain positive from 2024 onwards,” the report states.

5. The reduction of general government debt below pre-pandemic levels, to 171.3% of GDP in 2022, while it was over 200% in 2020. The government predicts that the public debt ratio for 2023 will be 162.6%. The public debt ratio will likely follow a steady downward path supported by the primary surplus.

6. Claiming additional funding from the REPowerEU Plan, in addition to the funds available under the EU Recovery Fund by implementing structural reforms in areas such as the business environment, labor market and public administration.

The Ministry of National Economy and Finance points out that:

The upgrade of the Greek economy to investment grade by R&I is a result of the upward trend of the Greek economy during the previous four years, political stability and the positive prospects for the country that are opening up after the June elections. This development opens the way for investment funds from Japan (and the Asian market as a whole) to the Greek economy. In addition, despite the fact that R&I is not among the rating agencies recognized by the European Central Bank, today’s upgrade is a harbinger of the upgrades expected in the next period from the other rating agencies recognized by the European Central Bank. A fact that will mean lower financing costs, greater investments in the country, growth and jobs.