Fitch Affirms Greece at ‘BB’; Outlook Positive

Fitch Ratings has affirmed Greece's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Positive Outlook.

Greece has high income per capita that far exceeds both the 'BB' and 'BBB' medians. Governance scores and human development indicators are among the highest of sub-investment grade peers. These strengths are set against still very high levels of non-performing loans (NPL) and very large stocks of public and external debt. The Positive Outlook reflects a sustained expected decline in public sector indebtedness, in the context of still low average borrowing costs, despite the sharp rise in government bond yields this year. Greek banks have made substantial progress on asset quality improvement, sharply reducing the level of NPLs in the banking sector.

High Public Indebtedness, Mitigants: Government debt as a share of GDP declined to 193.3% by end-2021, and is projected to fall further to 171.6% by 2024, driven by improving primary balances and favourable growth-interest costs dynamics. Despite this decline, the debt ratio in 2024 is still forecast to be among the highest of Fitch-rated sovereigns, and more than 3x the 'BB' median. At the same time, there are mitigating factors that support debt sustainability. Greece's liquid asset buffer is substantial (forecast to be 14.5% of GDP at year-end). The concessional nature of the majority of Greek sovereign debt means that debt-servicing costs are low and amortisation schedules are manageable.

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