Why Moody’s did not announce its rating for Greece

It came as no surprise that Moody’s decided not to proceed with its scheduled assessment of the Greek economy last Friday.

This is because the house is accustomed to the postponements of ratings in recent years, while in a new report it has revealed its stance regarding its movements in general this year.

Besides, last Friday, Moody’s postponed a total of 24 ratings, which means that the postponement of the Greek rating is no exception.

It is also worth remembering that last November, the international house upgraded our country by one notch to Ba3 and several reports followed which gave a vote of confidence for the prospects of the Greek economy.

In September 2018, Moody’s postponed the rating for Greece, which had just come out of the memorandum and would have to implement a series of reforms .

At the time, the agency  had chosen to wait for the events before taking a position, something it did in March 2019 with a double vote of confidence, after proceeding to upgrade Greece by two notches and specifically from B3 to B1.

Earlier in 2018, in February, the agency had also proceeded with a double upgrade of Greece after a respite of about a year.

In August 2019, a few months after the double upgrade, the agency had also decided to postpone its evaluation, pending important developments related to the change of government, the submission of the budget and the promotion of important reforms.

According to market sources, if the pandemic had not broken out, it is very likely that the house would have proceeded with a double upgrade of Greece in 2020 as well, however, it was finally limited to one notch up in November.

From 2016 onwards, the Moody’s makes one move every year for Greece, despite the fact that it plans two evaluations.

So this year it is likely it will give only one rating, with the next being scheduled for November.

At that time there will be a much clearer picture of the Greek economy but also of the further steps of progress of Greek banks.

Reforms support the economy

Beyond that, Greece’s stable credit profile balances the reforms the government has implemented in recent years, which are accelerating growth, with its high public debt, which remains the main challenge for the country’s creditworthiness, writes Moody’s in its new report.

The current government has improved institutions and governance in several areas. Thus, the country benefits from a favorable debt structure, an important “cushion” of liquidity while the debt is accompanied by affordable terms in terms of repayment.

“Greece’s assessment would be pressured upwards if further progress on structural reforms yielded tangible results in the form of stronger investment and would further increase and consolidate medium-term growth prospects,” said Moody’s report author Steffen Dyck, adding: “On the contrary, the rating would be under downward pressure if progress in reforming Greece’s institutions is reversed, jeopardizing the agreement with eurozone creditors.”

As for the coronavirus pandemic, it says it has halted Greece’s economic recovery and led to a sharp contraction in 2020, but significant European funds will be vital to boosting investment and growth in the coming years.

However, the main challenge for the credit profile remains the increased debt level, which amounted to 205.6% of GDP in 2020 and is the second highest among the countries rated by Moody’s.