S&P affirms Greece’s credit rating, citing rebalancing economy

Standard & Poor’s affirmed Greece’s sovereign credit rating today and gave it a stable outlook, saying it believed the country’s economy was gradually rebalancing.

The positive comments are the latest boost for Greece’s government, which hopes to return to the bond markets earlier than planned this year after striking a deal with foreign lenders for the latest tranche of loans under its bailout.

“Although we consider Greece’s domestic political environment to be fluid, our forecasts assume that, regardless of composition, the Greek government will adhere broadly to the current policy framework,” S&P said.

“We consider that the economy has started to rebalance,” it said in a statement affirming its ‘B-/B’ rating.

Fitch assigns Greece a B- credit rating while Moody's rates it Caa3. All three credit ratings are still deep in junk territory, reflecting a high debt level of about 175 per cent of the country's gross domestic product.

S&P said the stable outlook balances its view of the government’s commitment to fiscal and structural adjustments against the economic and political challenges of doing so.

“The government has made significant reforms to the labor market and fiscal revenue collection and plans further reforms in commerce,” it said.

After six months of wrangling with the EU and IMF in the longest review of its bailout so far, Athens won praise from its lenders this week to unlock the next tranche of loans.

Athens says last year’s surplus came in at €2.7 billion, compared with a bailout target for a balanced budget. That has boosted its hopes of returning to the bond market in the first half of the year after a four-year absence with a €2 billion five-year bond.

S&P, which has maintained its rating since upgrading Greece from “selective default” in December 2012, said it could raise its long-term rating on Greece if GDP growth were to pick up “substantially”.

Moody’s is due to publish its review on April 4th.

Athens and its lenders expect the economy to pull out of recession this year and grow marginally by 0.6 per cent. (Reuters)