Greece Gains Stronger Credit Rating Outlook

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Greece’s credit profile received a fresh boost after Moody’s Ratings revised its outlook on the country’s sovereign rating to positive from stable, while Scope Ratings upgraded Greece’s long-term rating to BBB+ from BBB.

Moody’s confirmed Greece’s investment-grade Baa3 rating, citing growing evidence that the government’s sustained focus on structural economic and institutional reforms is strengthening the country’s economic and fiscal resilience beyond the agency’s current expectations.

The agency said greater resilience could raise Greece’s structural growth rate and strengthen the government’s ability to continue reducing public debt, including through further early repayments of debt accumulated during the financial crisis.

Moody’s said the positive outlook also reflected increasing, although not yet certain, confidence that recent fiscal gains and political support for continued debt reduction would remain resilient through economic cycles.

The Baa3 rating reflects Greece’s reform record, favourable structural debt-sustainability indicators and significant improvements in public finances. Moody’s also highlighted continuing constraints, including the country’s high public debt, large external deficits, moderate productivity and a substantial stock of troubled debt outside the banking system that continues to weigh on indebted households and businesses.

Reforms support investment and growth

Moody’s said structural reforms are gradually easing long-standing constraints on investment and resource allocation while encouraging more economic activity to move into the formal economy.

Private investment has increased alongside improvements in tax administration, business licensing, insolvency procedures, judicial processes, land management, spatial planning, labour taxation and skills policies.

The agency also pointed to stronger employment and exports and healthier private-sector balance sheets.

Moody’s said the strength of the evidence varies across reform areas and remains uncertain in several cases. However, it said the breadth of the positive signals increases the likelihood that their cumulative effect could become significant for Greece’s credit profile.

The agency also said Greece’s economic model has become more investment-driven and increasingly supports productivity. It noted that private investment accounted for almost two-thirds of the five-percentage-point increase in the investment-to-GDP ratio since 2020.

Moody’s said this suggests that funding from the EU Recovery and Resilience Facility has more likely strengthened an investment recovery already under way rather than created it.

The agency also noted that foreign direct investment has become less concentrated in real estate, while knowledge-intensive activities have made a growing contribution to the economy.

The share of larger companies employing at least 50 people in gross value added rose to around 60% in 2024 from 45% in 2009, alongside growth in high-technology manufacturing and exports of financial and professional services.

Debt continues to fall

Moody’s said Greece’s debt trajectory remains broadly consistent with its expectations following the March 2025 rating upgrade.

Continued nominal economic growth, large primary surpluses and the active use of cash reserves to repay debt have driven the debt ratio sharply lower, from 209.4% of GDP in 2020 to 154.2% in 2024 and 146.1% in 2025.

The agency expects the ratio to fall to around 120% of GDP by 2030.

Moody’s also highlighted improvements in tax compliance. Digitalisation of transactions and employment has reduced opportunities to under-report income in sectors that have historically proved difficult to tax.

The estimated VAT compliance gap fell to around 9% in 2024 from 24% in 2019, broadly in line with the EU average of 9.5% in 2023.

Greece used its stronger fiscal performance to accelerate repayment of crisis-era debt, making an early repayment of €5.3 billion at the end of 2025 and planning a further €13 billion repayment by the end of 2026.

Moody’s said early repayments reduce gross debt and future debt-servicing requirements while demonstrating the government’s continuing commitment to debt reduction.

Scope upgrades Greece to BBB+

Scope Ratings separately upgraded Greece’s long-term sovereign rating to BBB+ from BBB, while changing the outlook to stable from positive.

The upgrade marks Scope’s second rating increase for Greece within investment grade. The agency first awarded Greece investment-grade status in 2023.

Scope said the upgrade reflected Greece’s rapid debt reduction, stronger fiscal sustainability, improved economic resilience and better medium-term growth prospects.

The agency also identified continued risks, including Greece’s still-high public debt, structural constraints on growth and persistent external vulnerabilities.

Scope said Greece recorded a general government surplus of 1.7% of GDP and a primary surplus of 4.9% in 2025.

It expects the overall fiscal surplus to remain around 3.0% of GDP in 2026, with the primary surplus at about 4.1%, before the latter gradually declines to around 3.7% in 2027 as the government increases pension spending and introduces temporary energy-support measures.

The agency expects Greece’s real GDP growth to remain at 1.9% in 2026 and 1.7% in 2027.

Scope forecasts that the public debt ratio will fall to approximately 136% of GDP in 2026 from 146.1% in 2025 and reach around 110% by 2031.

Debt structure provides additional protection

Scope also highlighted Greece’s favourable debt structure, including long maturities, low refinancing risks, substantial liquidity reserves and a high proportion of official-sector financing on favourable terms.

Around 70% of Greece’s public debt is owed to official-sector creditors, while the weighted average maturity stood at 18.3 years in June 2026.

The government also held cash reserves of around €31 billion, equivalent to approximately 13% of GDP, providing a significant buffer against market volatility.

Scope expects Greece’s gross financing needs to remain comfortably below 10% of GDP over the medium term, while interest payments should average around 6.8% of government revenue between 2026 and 2031.

Despite the upgrade, Scope stressed that Greece’s debt burden remains high compared with most other countries it rates. It also pointed to demographic pressures, relatively weak productivity, external imbalances and residual troubled debt in parts of the economy as continuing constraints on Greece’s credit profile.

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