Moody's affirms Greece's Ba3 ratings, changes outlook to positive from stable


Wide divergence between Greece’s strong economic performance and the gradual rise of political instability said the latest report.

Moody's Investors Service (Moody's) has today changed the Government of Greece's outlook to positive from stable and affirmed the local currency (LC) and foreign currency (FC) long-term issuer and LC senior unsecured ratings at Ba3. Moody's has also affirmed the FC senior unsecured shelf and MTN programme ratings at (P)Ba3, the LC commercial paper rating at Not Prime (NP), and the FC other short-term rating at (P)NP.

The main drivers for the outlook change to positive are prospects of a period of higher nominal GDP growth than in the past decade, partly the result of improvements in governance and effective past economic and banking sector reforms which are more visibly bearing fruit. Together with continued commitment to sound fiscal metrics supported by the implementation of fiscal measures, higher nominal GDP growth will contribute to a marked decline in Greece's debt burden in the next few years.

The affirmation of Greece's Ba3 ratings reflects a balance between the improvements seen in many areas of Greece's credit profile with persisting challenges. In particular, further reforms in the areas of justice, education, business environment and labour markets would support a higher rating. Moreover, the government debt burden remains very high and supported by official creditors, with future improvements and full return to market-based financing involving the maintenance of large primary surpluses for years to come.

Greece's local and foreign currency country ceilings remain unchanged at A3. For euro area countries a six-notch gap between the local currency ceiling and the local currency issuer rating as well as a zero-notch gap between the local currency ceiling and foreign currency ceiling is typical, reflecting benefits from the euro area's strong common institutional, legal and regulatory framework, as well as liquidity support and other crisis management mechanisms. It also reflects Moody's view of de minimis exit risk from the euro area.