Moody’s Investors Service has today upgraded Greece’s government bond rating to Caa3 from C. The outlook on the rating is now stable. The short term ratings remain Not Prime (NP).
The upgrade reflects the combination of the following key drivers:
1.The significant fiscal consolidation that has taken place under Greece’s structural adjustment program despite low growth and political uncertainty. As a result, Moody’s expects that the government will achieve (and possibly outperform) its target of a primary balance in 2013, and record a surplus in 2014 in accordance with the adjustment program.
2.The improvement in Greece’s medium-term economic outlook supported by a cyclical recovery in the economy and also the progress made in implementing structural reforms and rebalancing the economy.
3.The significant reduction of the government’s interest burden following previous restructurings and official sector repayment assistance.
The key drivers taken together reduce the likelihood of further Private Sector Involvement (PSI) being undertaken as a condition for further financing.
Concurrently, Moody’s has today raised the local and foreign-currency ceiling of Greece to B3 from Caa2.
Greece’s economy is expected to shrink 0.5 percent in 2014 and expand 1 percent in 2015, Moody’s said in the statement. The budget surplus is expected to be at about 1.5 percent of gross domestic product next year, according to the statement.
The Moody’s ranking is nine levels below investment grade, while Standard & Poor’s and Fitch Ratings each rate Greece B-, which is six notches below the junk threshold.
(source: moodys)
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