Greek bond yields have improved their position in recent years compared to some of their European counterparts. However, according to international rating agencies, such as Fitch, there is considerable work needed for them to remove their cautionary notes and upgrade the Greek economy.
Fitch is expected to release its evaluation of the Greek economy on November 22, with a possible scenario being an upgrade of the economy from “stable” to “positive”.
Recently, SCOPE Ratings released a report stating that Greece’s public debt as a percentage of GDP is expected to decline significantly, reaching 150.5% by the end of this year and 132.8% by 2029. This would be the lowest debt level since 2009, positioning Greece more favorably than Italy, which currently holds a higher credit rating at BBB+.
However, despite this favorable outlook by SCOPE Ratings, rating agencies are closely examining various issues that still remain “thorny” for the Greek economy. Their primary concerns include Greece’s high public debt, a significant current account deficit, and ongoing reforms.
These issues reflect the Greek government’s plan which targets to further reduce the country’s public debt by 20% of GDP by 2028. Public debt is projected to have an average annual decrease of 5.1 percentage points across the four years covered by the plan. Consequently, debt as a percentage of GDP is expected to fall from 153.7% in 2024 to 133.4% in 2028.
What is more, the government is set to proceed with early repayment of a bilateral loan stemming from the second bailout, with another similar move expected in 2025, with aim to improve Greece’s public debt profile.
A recent IOBE analysis of the Greek economy also highlights the need for stronger productive investment, rebalancing of the external account through increased exports and domestic savings, and maintaining fiscal stability over the medium term.
Meanwhile the IMF forecasts that Greece’s current account deficit is not expected to drop below 3.4% until 2029, with the Hellenic Federation of Enterprises (SEV) also raising concerns about the deficit, which is a major issue for rating agencies observing the country’s economic progress.
Finally, reforms also remain critical with rating agencies and international organizations watching for progress on judicial reform, along with the planned digitization of taxpayer transactions and interactions with authorities, expected to be completed this year.
