S&P Global Ratings upgraded Greece's credit rating to investment grade, the first such move by one of the three major rating agencies since the country entered a debt crisis more than a decade ago.Friday's decision gave Greece a BBB- rating with a stable outlook. S&P joined Japan's Rating and Investment Information Inc. , Germany's ScopeRatings and Canada's DBRS Morningstar joined the ranks in removing Greece from junk status. All of these rating changes were made after reformist Prime Minister Kyriakos Mitsotakis won re-election in June.
Mitsotakis has pledged to maintain business-friendly policies while making clear to markets that he will not jeopardize budget rules despite a summer increase in spending due to wildfires. He also pledged to reduce debt to less than 140% of output by 2027 from a high of 206% in 2020.
"Significant budget consolidation has put Greece's fiscal trajectory on a track of steady improvement," S&P said in a statement. "Supported by a rapid economic recovery, the Greek government has been able to regularly exceed its budget targets, despite a gradual increase in social transfers."
According to government forecasts, the Greek economy will grow by 2.3% in 2023 and 3% in 2024, which is much better than most European countries. Tourism remains a major contributor and its annual performance is set to reach new highs.
Although widely expected, S&P's move opens the door for further gains in Greek bonds if Fitch or Moody's follow suit. Greece needs to receive a BBB- or equivalent rating from at least two of the three major ratings firms to be readmitted to the investment-grade bond index, which would give the country access to a multi-trillion-dollar investment pool.
Moody's recently upgraded Greece's rating by two notches, one step away from investment grade. Fitch is the last of the three major agencies to adjust its ratings after this summer's election, with an update scheduled for December 1.