**Moody’s Upgrades Greece’s Credit Outlook, Citing Economic Resilience**
Moody’s Ratings has upgraded Greece’s sovereign credit outlook from stable to positive while maintaining its Baa3 investment-grade rating. This decision reflects the agency's recognition of the country's strengthening economic resilience, driven by ongoing structural reforms and improvements in fiscal management.
In its assessment, Moody’s noted that evidence is mounting that Greece's economic and institutional reforms are yielding significant results. The agency highlighted that the advancements in Greece’s economic and fiscal resilience are surpassing its previous expectations. This positive trend could potentially enhance Greece's structural growth rate and bolster the government’s capacity to continue its efforts in reducing public debt.
Moody’s emphasized that the enhanced resilience of the Greek economy will support the government's multi-year debt reduction strategy, which includes early repayments of debt accumulated during the financial crisis. The agency expressed cautious optimism about the sustainability of recent fiscal gains and the political backing for ongoing debt reduction, suggesting that these factors could withstand economic fluctuations.
The Baa3 rating assigned to Greece reflects a combination of its reform track record, favorable structural debt sustainability indicators, and notable improvements in public finances. However, Moody’s also pointed out several persistent challenges, including high public debt levels, substantial external deficits, moderate productivity, and a considerable amount of distressed debt outside the banking system.
Structural reforms are gradually alleviating long-standing barriers to investment and resource allocation, encouraging more businesses to operate within the formal economy. Moody’s cited improvements in various areas, including tax administration, business licensing, insolvency procedures, the justice system, land management, spatial planning, labor taxation, and skills policy. These reforms have contributed to stronger employment figures, increased exports, and healthier private sector balance sheets.
While the evidence of reform effectiveness varies across different areas, Moody’s indicated that the overall positive signals could significantly enhance Greece’s credit profile. The agency also noted a shift in Greece’s growth model towards a more investment-oriented approach, which is increasingly supportive of productivity. Private investment has accounted for nearly two-thirds of the five-percentage-point increase in the investment-to-GDP ratio since 2020, indicating that the recovery is more than just a temporary effect of the Recovery and Resilience Facility (RRF).
Moody’s further clarified that the latest support from the RRF, which includes grants, subsidized loans, and complementary public infrastructure, is likely to reinforce an already ongoing investment recovery rather than act as its sole catalyst. The agency estimates Greece’s potential growth rate at approximately 1.5%, suggesting that the ongoing structural transitions could lead to growth and fiscal resilience that exceed current projections.
In terms of public debt management, Greece has seen a notable decline in its debt-to-GDP ratio, dropping to 146.1% in 2025 from a peak of 209.4% in 2020. Moody’s forecasts that this ratio could further decrease to 120% by 2030, supported by expected primary budget surpluses of around 2.5-3.0% of GDP. The digitalization of transactions and employment has also played a role in reducing the opportunities for income under-reporting, with Greece’s estimated VAT compliance gap decreasing significantly from 24% in 2019 to around 9% in 2024.
In a demonstration of its commitment to debt reduction, Greece repaid €5.30 billion of debt early at the end of 2025 and plans to repay an additional €13.00 billion by the end of 2026. Moody’s noted that these early repayments not only reduce gross debt but also lower future debt servicing needs.
Despite the positive outlook, Moody’s cautioned that Greece still faces challenges, including a deeply negative net international investment position and long-term demographic pressures that could impact labor supply and medium-term growth. While Greek banks have alleviated high levels of non-performing loans, a significant amount of distressed debt remains in other sectors of the economy.
Overall, Moody’s assessment indicates that while Greece’s debt levels will remain among the highest of all countries rated by the agency until the end of the decade, the structure of its debt mitigates exposure to global interest rate increases. The agency’s upgrade of Greece’s credit outlook reflects a growing confidence in the country’s economic trajectory and its ability to navigate the complexities of fiscal management and structural reform.