Greece Under Moody's Scrutiny: What Today's Rating Decision Means for the Economy

In a pivotal moment for Greece's post-crisis recovery, the US-based credit rating agency Moody's is set to deliver its verdict on the country's creditworthiness today, just days after rival agency DBRS opted to hold Greece's rating steady without an upgrade. Analysts widely anticipate a similar cautious stance from Moody's, reflecting ongoing concerns over growth, inflation, and deep-rooted demographic challenges.

This review caps a tense week for Greek policymakers and investors, as the nation's economy – now firmly in investment-grade territory – faces fresh tests amid a cooling European backdrop. Moody's, which was the last major agency to elevate Greece to investment grade (Baa3) in March 2025, has historically lagged behind peers like DBRS, which first upgraded the country in September 2023. "Expect continuity rather than a leap forward," said one Athens-based economist, echoing a consensus that Moody's restraint stems from persistent structural headwinds.

A Calendar of Coming Reviews
Beyond today's decision, Greece's fiscal fate hangs on three more evaluations before year's end:
- October 17: S&P Global Ratings
- November 7: Scope Ratings
- November 14: Fitch Ratings

These assessments will scrutinize not just debt metrics but also Greece's ability to sustain momentum after years of reforms. Inflation remains a thorn, hovering stubbornly above the eurozone average, while growth – a perennial red flag for raters – has shown signs of faltering.

Tax Relief Package: A Credit Positive, But No Silver Bullet
In a rare bright spot, Moody's recent commentary praised the Greek government's September 6 announcement of a €1.6 billion annual tax relief package (equivalent to 0.6% of GDP), to be phased in from 2026. Deemed "credit positive," the measures target families and young workers, aiming to tackle Greece's acute demographic crisis – a shrinking, aging population that threatens long-term prosperity.

The package includes incentives to boost birth rates, retain talent, and lure back emigrants by hiking disposable incomes, especially in rural areas. Yet, Moody's tempers its optimism with uncertainty: Will these fiscal perks truly reverse low fertility (just 1.3 births per woman in 2023) or stem the brain drain of working-age Greeks? Structural barriers like scarce job opportunities and soaring housing costs, the agency warns, could blunt the impact, leaving migration and family formation decisions unchanged.

Greece's demographic woes are no secret. Population decline has gripped the country since the early 2010s, fueled by the 2009-2018 debt crisis. Life expectancy is rising, accelerating aging: The old-age dependency ratio is projected to hit 61% by 2040, up from 39% in 2022, per European Commission data. Moody's links this "population collapse" directly to economic drag – fewer workers mean constrained labor supply, stunted production, and ballooning pension costs. Without a cohesive national strategy, it cautions, demographics could eclipse all other risks, eroding productivity and state revenues even as bond spreads narrow and investments flow.

Growth in the Slow Lane
Adding to the unease, Greece's economy decelerated to 1.7% year-on-year growth in Q2 2025, down from 2.2% in Q1. Household spending – a key driver – dipped 0.1% quarter-on-quarter and rose a meager 1% from Q2 2024, signaling consumer caution amid sticky prices.

The Finance Ministry still eyes 2.3% full-year GDP expansion, but the first half's 1.95% average falls short, stoking doubts. Exports face headwinds from eurozone slowdowns and potential US-EU tariff frictions, despite recent trade pacts. Compounding this, UBS recently slashed its 2025 growth forecast for Greece, citing broader uncertainties.

As Recovery and Resilience Facility funds – the EU's post-pandemic lifeline – taper off by August 2026, analysts foresee further softening. "The post-recovery dynamic is unproven," Moody's notes, questioning whether Greece can muster medium-term vigor without external boosts.

Today's Moody's call could reaffirm stability or inject volatility into markets already jittery over global trade tensions. For Greeks eyeing everything from mortgages to pensions, the stakes feel intensely personal – a reminder that while the crisis era fades, building a resilient future demands more than fiscal tweaks. Eyes now turn to Washington for clues on whether Greece's story arc bends toward upgrade or holds in cautious limbo.

(Source: To Vima)30