Thursday’s report by Moody’s highlighting positive developments in Greece’s fiscal health and the local credit sector is being viewed by market analysts and government officials as a prelude to a credit rating upgrade.
The international ratings agency revised its growth estimate for this year in Greece from 0 to 0.4 percent and considers the fact that there was a primary budget surplus of 711 million euros against a target for 208 million in the January-May 2014 period as a credit positive for the country.
Figures showing that funding of Greek banks by the European Central Bank and the Bank of Greece (via the emergency liquidity assistance system) was reduced 18.2 percent in May from April to reach 50.7 billion euros were viewed as another credit positive. The decline amounted to 40.6 percent on an annual basis.
Moody’s is expected to issue its next assessment of the Greek economy on August 1. According to its analysts, the reason it decided to qualify fiscal developments as credit positive at this point is that the budget execution beat its targets despite the adverse political environment stemming from last month’s local and European elections. The analysts noted that the targets were beaten as a result of improved tax administration and containment of expenditure.
Another significant factor for the Moody’s verdict was the economy’s recovery after six years of serious economic contraction. After all, this is the first time in the last six years that Moody’s has predicted gross fixed capital investments will make a positive contribution to growth, mainly thanks to the increased absorption of resources from European Union structural funds and the restarting of major highway projects.