Fitch Ratings Greece

Fitch Ratings revises Greece’s outlook from “Stable” to “Positive”


Fitch Ratings has revised Greece’s outlook to “Positive” from “Stable”, although it kept the country’s rating at “BB”, two notches below investment grade.

The credit ratings agency in a report issued Friday (Jan. 14) raised its estimate for Greece’s economic growth in 2021 to 8.3%, much faster than the 4.3% forecast in the previous rating review last July.

“We expect the recovery in economic activity to continue in 2022 … and for the economy to expand by a further 4.1 percent, with a similar growth rate forecast for 2023” Fitch said.

Greek lenders are a big reason for the upgrade, “sharply reducing the level of non-performing loans (NPLs) in the banking sector and enhancing their ability to provide credit to the real economy.”

The overall level of NPLs fell sharply over 2021, to EUR20.9 billion in 3Q21 from EUR60 billion a year earlier. The NPL ratio declined to 15.0% from 36.3% over the same period.

The agency further noted that the “continued economic recovery and the phasing out of pandemic-related support measures will bring about a sharp reduction in the government deficit, to 4.1% of GDP. We expect a further reduction in the deficit to follow in 2023, to 2.9% of GDP.”

Fitch saw a debt ratio at 198.4% in 2021, against 206.3% in 2020, and declining further to 190.3% in 2022 and to 185.3% by end-2023.

Further on the positive side, Greece is expected to repay outstanding loans from the International Monetary Fund, in 2022, and prepay the 2022 and 2023 instalments of loans from the Greek Loan Facility, the first financial support program for Greece agreed in 2010. “Overall, these payments will amount to EUR7.2 billion (around 3.8% of forecast GDP), and we assume that around half of this will funded from cash reserves.”

Greece has high income per capita that far exceeds both the ‘BB’ and ‘BBB’ medians. Governance scores and human development indicators are among the highest of sub-investment grade peers.

On the negative side, the general government deficit in 2021 declined only slightly to 9.7% of GDP from 10.1% in 2020.

Public indebtedness rose sharply due to the Covid crisis, and the debt stock will remain very large for a prolonged period. In 2023, the debt ratio is forecast to be the second-highest of Fitch-rated sovereigns, and more than 3x the ‘BB’ median forecast (56.0% of GDP).

Fitch notes that “Greece has high income per capita that far exceeds” the median level of countries in the same investment grade and that “governance scores and human development indicators are among the highest of sub-investment grade peers.”

Fitch’s next scheduled report on Greece will be on July 8.