Japanese boost to Greek credit rating

Japanese boost to Greek credit rating

Japanese rating agency “Rating and Investment Information” (R&I) on Monday delivered a considerable vote of confidence in the prospects of the Greek economy, upgrading Greece by two notches to BB with a stable outlook. This has brought Greece within two notches from investment grade.

Although R&I is not part of the big four (Fitch, S&P, Moody’s and DBRS Morningstar), the decision by the Japanese firm is seen as one more important step for Greece on the way to normalcy.

As Finance Minister Christos Staikouras said on Monday, as much as R&I is not considered an eligible agency by the European Central Bank, the move came eight months after the previous upgrade (in April) and the new rating is higher than all other agencies, standing just two points before the coveted BBB- level that constitutes investment grade. Staikouras noted that this highlights the change in sentiment and view regarding the Greek economy by a conservative agency, thanks to the securing of political stability in Greece after the summer’s general election and the application of a cohesive and integrated economic policy.

The agency said that the Greek economy is expected to continue its robust course and expects growth to remain steady at 2 percent in 2020. The public debt index is reduced thanks to the maintenance of high primary budget surpluses, as although the level of the debt remains high its sustainability has improved thanks to the large cash buffer and the much more favorable funding environment.

R&I pointed out that the reasons leading to this double upgrade are that growth potential is going to be enhanced by the reduction of taxes on households and corporations, the improvement in business sentiment and the acceleration of privatizations.

On the banking sector, R&I commented that the capital indexes of the four systemic lenders are well above the requirements of monitoring authorities, while profits have rebounded and deposits are constantly on the rise. It added that while the index of nonperforming loans remains high, the application of the “Hercules” asset protection scheme will contribute significantly to the reduction of bad loans and the improvement of the credit sector’s share in the funding of the economy.

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