Written by 8:40 pm EU Investment

Research: Rating Action: Moody’s affirms Greece’s Ba3 ratings with stable outlook

Frankfurt am Main, September 16, 2022 — Moody’s Investors Service (“Moody’s”) has today affirmed the Government of Greece’s long-term local currency and foreign currency issuer ratings and local currency senior unsecured rating at Ba3. Moody’s has also affirmed the foreign currency senior unsecured shelf and senior unsecured MTN programme ratings at (P)Ba3, the local currency commercial paper rating at Not Prime (NP), and the foreign currency other short-term rating at (P)NP. The rating outlook remains stable.

The decision to affirm Greece’s Ba3 ratings with a stable outlook balances improvements in Greece’s credit fundamentals over the past two years, against persistent challenges amid an increasingly adverse macroeconomic environment in Europe.

In particular, the Greek authorities have made progress in reducing banks’ nonperforming loans (NPL), which frees them up to lend and support the economy. Moreover, the Greek economy has rebounded quickly from the pandemic-related economic shock, and prospects are good for investment growth in light of large EU funds and foreign direct investment (FDI), supporting Greece’s economic strength.

That said, there is a high risk of a deep recession in the euro area, persistent inflation, more protracted disruption to energy supplies, tighter global liquidity, and the withdrawal of European Central Bank (ECB) monetary policy support. Slowing reform momentum in areas like justice, education, the business environment and labour markets following upcoming elections, would weigh on the economy and affect Moody’s assessment of Greece’s institutional and governance strength.

Moreover, although Moody’s expects strong growth and a declining primary deficit will see the government’s debt burden decline to below 180% of GDP by the end of 2022, Greece will still have one of the highest debt burdens globally by that point and its debt sustainability is contingent on support from official creditors. As a result, any future improvements and full return to market funding are dependent on the government maintaining a prudent fiscal stance for years to come.

Greece’s local and foreign currency country ceilings remain unchanged at A3. For euro area countries a six-notch gap between the local currency ceiling and the local currency issuer rating as well as a zero-notch gap between the local currency ceiling and foreign currency ceiling is typical, reflecting benefits from the euro area’s strong common institutional, legal and regulatory framework, as well as liquidity support and other crisis management mechanisms. It also reflects Moody’s view of de minimis exit risk from the euro area.




The Greek authorities have made good progress in reducing the NPL ratio to single digits, which is allowing banks to support the economy and over time will reduce risks to the sovereign balance sheet. Greece’s system-wide consolidated NPL ratio was 9.5% in June 2022 down from 21.3% a year ago, according to data from the Bank of Greece.[1] It is, however, still by far the highest in the euro area.

This normalization is already reflected in stronger lending growth, mainly to corporates; the performance of the consumer credit sector remains lackluster. At the same time, strong deposit growth has led to one of the lowest loan-to-deposit ratios in the euro area, which helps banks’ funding and liquidity.

Capitalization is above regulatory minimum requirements, but among the lowest in the euro area. Moody’s expects capital consumption related to NPE securitizations will be minimal in 2022-23, as most of the transactions have been effected and Greek banks mostly frontloaded any relevant losses in past years.

Higher interest rates and good demand for loans strengthen the outlook for Greek banks’ profitability. Moody’s expects banks to start gradually paying modest dividends to shareholders as they return to bottom-line profitability, while ensuring that they remain comfortably above capital requirements.


Greece has rebounded strongly from the pandemic shock with real GDP growth of 8.4% year-on-year in the first half of 2022.[2] As of the second quarter, real GDP was 5% above its fourth quarter 2019 level, much higher than the 1.8% for the euro area and 2.3% for the EU-27.[3] Moody’s projects real GDP growth of 5.3% for this year, driven by very strong tourism, domestic consumption and investment, but also improving goods exports.

For 2023, Moody’s forecasts a sharp slowdown in growth to 1.8%, as high inflation will weaken households’ purchasing power and rising interest rates could weigh on investment. Greece’s harmonized index of consumer prices (HICP) increased by 11.2% year-on-year in August, marking a slight slowdown compared to June and July, but core inflation rates continue to rise, reaching 4.2% in August. Moody’s projects an average HICP inflation rate of close to 9% this year and about 4% in 2023.

Over the coming years, Greece’s economic growth will be supported by investment, both through EU funds and private investment. Under the Recovery and Resilience Facility (RRF) Greece has access to ?30.5 billion (17% of 2021 nominal GDP) split into ?12.7 billion in loans and ?17.8 billion in grants. The European Commission estimates that Greece will see the largest benefits in terms of lifting output by up to 3.3% until 2026[4] putting Greece on top in comparison to other EU member states.

Foreign direct investment (FDI) inflows are at record levels, with several large projects in the pipeline. According to Bank of Greece data, net FDI inflows reached ?5.1 billion (2.8% of GDP) compared to ?2.9 billion (1.8% of GDP) in 2020, and ?4.5 billion (2.5%) in 2019. For the first half of 2022, net FDI inflows reached ?4.3 billion up by 60% compared to the same period in 2021.[5]

Together with further structural reforms, this could lift long-term potential growth above the 1.2% projected for the period 2019 to 2070 in the 2021 Ageing Report.[6] Greece faces highly adverse demographics, with the share of the working age population in the total population projected to shrink by almost nine percentage points until 2050.[7] A slowdown in reform momentum in areas like justice, education, business environment, labour markets and financial system following the next elections, which will most likely take place in early 2023 could weigh on the economy and affect Moody’s assessment of Greece’s institutional and governance strength.


Strong nominal growth and a gradual reduction in the fiscal deficit have led to a decline in the debt ratio to 193.3% of GDP in 2021 from 206.3% in 2020. Moody’s projects a further decline to below 180% end of this year. However, the government’s debt burden remains very high and debt sustainability is contingent on the support of official creditors, with future improvements and full return to markets dependent on the authorities maintaining a prudent fiscal stance for years to come.

Greece’s government debt trajectory is relatively resilient to shocks, according to Moody’s projections. Weaker growth or slower fiscal consolidation are the main risks to the projected debt burden path. In addition, contingent liabilities related to financial institutions are very high, but Moody’s sees a low likelihood of crystallization on the government’s balance sheet in its baseline scenario.

The Greek government’s favourable debt structure, marked by long average term to maturity and a high share of government debt owed to official creditors at concessional terms, largely shields Greece from rising interest rates and supports debt affordability. A large cash buffer of close to 18% of GDP further mitigates financing risks.

In Moody’s view, the government remains committed to its primary balance targets (deficit of 2% of GDP in 2022, a surplus of around 1% in 2023) outlined in the Stability Programme. Moody’s expects average primary surpluses of around 1.5% of GDP in 2023-25.

Energy subsidies ? which already started in late 2021 — are largely financed by emission trading scheme revenues, but costs could rise into 2023. The recently announced set of additional measures will be funded through stronger-than-budgeted revenues, which increased 13.1% year-on-year during the first eight months of 2022. The strong rise in revenues reflects the economic rebound and higher inflation, and increased revenue efficiency. Total expenditure was about ?2 billion lower than during the same period last year, as pandemic support measures have been phased out, and the state budget balance showed a deficit of ?4.1 billion much lower than the ?10.5 billion deficit in the first eight months of 2021.


Greece’s ESG Credit Impact Score is moderately negative (CIS-3), mainly reflecting social risks ? in particular the adverse impact from demographics on long-term growth, and moderately negative exposure to environmental and governance risks. However, Greece’s governance and institutions have been improving over the past several years and the authorities’ capacity to respond to shocks has shown to be solid in the context of for instance the coronavirus pandemic.

Greece’s overall E issuer profile score is moderately negative (E-3). With the exception of waste and pollution and carbon transition, Moody’s scores Greece’s exposure to the various E risks at moderately negative. Greece experienced its worst wildfires in decades in 2021, highlighting credit risks from climate change. An increase in the frequency and severity of these events could weigh on tourism and other sectors. The solid financial and institutional support from European institutions that Greece can count on is an important mitigating factor.

Moody’s assesses Greece’s S issuer profile score as highly negative (S-4), reflecting an adverse demographic profile, exacerbated by significant emigration of the highly-qualified and the young during the crisis years as well as still high unemployment, notwithstanding the improving trend. Access to housing, healthcare and basic services is good. Substantive pension reforms over the past several years limit the fiscal impact of the adverse demographic profile, while ongoing labour market and education reforms should improve the functioning of the labour market, mitigating some of the above mentioned social risks.

Greece’s G issuer profile score is moderately negative (G-3). Greece’s scores in global surveys have been improving in the recent past, in particular with regards to regulatory quality and rule of law. Fiscal credibility has improved significantly, and Greece benefits from significant technical support from the EU. Although Greece has exited the Enhanced Surveillance framework on 20 August 2022, the country remains in post-programme monitoring and subject to normal European Semester procedures. Ongoing monitoring by the EU in the context of NextGen EU will help to fully embed recent governance and institutional improvements, and provides an important mitigant.

GDP per capita (PPP basis, US$): 32,218 (2021) (also known as Per Capita Income)

Real GDP growth (% change): 8.3% (2021) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): 4.4% (2021)

Gen. Gov. Financial Balance/GDP: -7.4% (2021) (also known as Fiscal Balance)

Current Account Balance/GDP: -5.9% (2021) (also known as External Balance)

External debt/GDP: [not available]

Economic resiliency: baa3

Default history: At least one default event (on bonds and/or loans) has been recorded since 1983.

On 13 September 2022, a rating committee was called to discuss the rating of the Greece, Government of. The main points raised during the discussion were: The issuer’s economic fundamentals, including its economic strength, have materially increased. The issuer’s fiscal or financial strength, including its debt profile, has not materially changed. The issuer’s susceptibility to event risks has not materially changed.



A continuation of pro-growth, pro-reform economic policies and commitment to fiscal consolidation, irrespective of a potential coalition government following the next general elections, leading to macroeconomic and fiscal indicators that outperform Moody’s baseline expectations would support a positive outlook. Further improvements in the banking sector would also be credit positive.


A protracted period of heightened political uncertainty that leads to a reversal of the policy path seen over the past years, weighing on business sentiment and FDI would be credit-negative. Similarly, a deeper than expected recession in the euro area with a more pronounced impact on Greece’s economy and government finances could also weigh on the outlook. A sustained, material deterioration of the government’s fiscal position in combination with a sharp deterioration of the banking sector’s health would trigger a negative rating action.

The principal methodology used in these ratings was Sovereign Ratings Methodology published in November 2019 and available at https://ratings.moodys.com/api/rmc-documents/63168. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.


For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.


[1] Bank of Greece 13-Sep-2022

[2] Elstat 13-Sep-2022

[3] Eurostat 13-Sep-2022

[4] European Commission 13-Sep-2022

[5] Bank of Greece 13-Sep-2022

[6] European Commission 13-Sep-2022

[7] Eurostat 13-Sep-2022

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Steffen Dyck

Senior Vice President

Sovereign Risk Group

Moody’s Deutschland GmbH

An der Welle 5

Frankfurt am Main, 60322


JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454

Alejandro Olivo

MD-Sovereign/Sub Sovereign

Sovereign Risk Group

JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454

Releasing Office:

Moody’s Deutschland GmbH

An der Welle 5
Frankfurt am Main, 60322


JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454

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