The Covid-19 pandemic halted an improving trend for Greece’s debt profile, Moody’s announced on Friday, in its report on the Greek economy, with the international ratings agency highlighting two points:
- Cost and structure of debt mitigate very elevated debt levels
- Coronavirus pandemic is expected to be a transitory shock amid improving credit trends
The entire report reads:
Greece's (B1 stable) credit profile is constrained by the country's elevated public debt burden, which stood at 177% of GDP last year and is one of the highest ratios among Moody's-rated sovereigns, Moody's Investors Service said in an annual report today. The coronavirus outbreak has interrupted the country's improving credit trends, but it should be a transitory shock.
"Greece's public finances have improved significantly over the past several years, and the government that was elected last July has made a promising start with its investment-focused policy programme," said Kathrin Muehlbronner, a Moody's Senior Vice President and the report's author. "But successive governments will need to maintain a prudent fiscal stance for years to come to ensure long-term debt sustainability. Other reforms implemented over the past years, including measures to strengthen institutions, will need to be sustained and deepened."
Greece's credit strengths include its relatively wealthy population, a benign debt-servicing profile that provides fiscal flexibility despite the large debt burden and significant euro area support.
The sovereign rating could be upgraded if the government continued to implement the commitments given to the euro area, including reforms that had resulted in an improved business climate and stronger investment while maintaining solid public finances. Renewed impetus for improving the banking sector's health would also be positive.
Conversely, downward pressure on the rating could develop if the Greek government were to deviate from its commitments and reverse previously agreed and legislated reforms, or if tensions with official creditors re-emerged for any other reason.”