S&P upgrades Greece’s credit rating outlook, but keeps Italy on hold

The outlook on Greece’s sovereign credit rating was upgraded to positive by S&P Global Ratings on Friday, while Italy’s was held steady, highlighting a divergence of the two southern European economies.

S&P said its decision it built on Greece’s recent progress on structural reforms, an increase in investment and its rapidly improving fiscal position, which have made the country one of Europe’s fastest-growing economies.

Instead, S&P kept His outlook on Italy’s credit rating was unchanged, saying he expected the country’s debt to gradually decline over the next few years, but that this was “balanced against the risk of a pullback in delivering critical reforms” that could delay funding. EU criticism.

Data released by Eurostat, the EU statistics agency, showed that Greece returned to a primary budget surplus of 0.1 percent of gross domestic product last year, which excludes the cost of interest payments, after two deficit years.

However, S&P maintained Greece’s credit rating below investment grade at “’BB+/B”, while Italy’s remains investment grade at “BBB/A-2”.

Greece, which has elections next month, has benefited from increased investment, a reduction in its huge debt burden and more efficient tax collection. Tourism in the country recovered to reach 97 percent of pre-pandemic levels last year, while Greek banks cut toxic loans from 45 percent of their balance sheets in 2017 to less than 10 percent.

The Greek economy has achieved one of the strongest recoveries from the Covid-19 pandemic of any eurozone country, growing 8.4% in 2021 and 5.9% last year, and the growth remains above the eurozone average for the next two years.

The country’s debt to GDP ratio fell from a peak of 206 percent in 2020 to 171 percent last year, according to S&P, which predicted it would continue to fall to just over 135 percent by 2026.

Italy’s fiscal position has also improved, but its primary budget remained in deficit of 0.1 percent of GDP last year. S&P said it expected Rome to run a surplus starting next year, while growth in Italy would accelerate from 0.4% this year to 1.4% by 2025.

“Anchored by the reintroduction of EU fiscal rules next year, the authorities are prepared to continue a gradual pace of consolidation over the next few years, posting slight primary surpluses by 2024, putting the debt-to-GDP ratio at a slight downward trend,” S&P said. Italian debt would fall from 144 percent of GDP last year to 136 percent by 2026, he forecast.

S&P also revised the UK credit outlook to stable from negative, indicating that higher economic risks have abated.

“The government’s decision to drop most of the proposed unfunded budget measures in September 2022 has strengthened the fiscal outlook,” S&P said, referring to the fiscal agenda proposed by former Prime Minister Liz Truss that caused the government’s debt to UK took a nosedive and increased risks to pensions in the country when it was announced.

While the agency affirmed the UK’s AA credit rating, it said growth would be below historical averages over the medium term.

Additional reporting by Jaren Kerr

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