Moody's Upgrades Greece Outlook, Cites Debt Reduction

Moody's Ratings raised Greece's sovereign credit outlook to positive from stable. The agency affirmed the country's Baa3 investment-grade rating. This move reflects growing evidence of structural economic and institutional reforms. These reforms are strengthening the nation's fiscal resilience.

The agency stated that improvements in economic and fiscal resilience are exceeding current expectations. This trajectory potentially raises Greece's structural growth rate. It also strengthens the government's ability to continue reducing public debt. The positive outlook suggests that recent fiscal gains will remain robust through economic cycles.

Public debt burden declines sharply

Public debt fell to 146.1 percent of GDP in 2025. This is down from 154.2 percent in 2024. The peak was 209.4 percent in 2020. Moody's forecasts a further decline to 120 percent by 2030. Primary budget surpluses of approximately 2.5 to 3.0 percent of GDP support this reduction.

Greece repaid 5.30 billion euros of debt early at the end of 2025. The government plans to repay another 13.00 billion euros by the end of 2026. These early repayments reduce gross debt and future servicing needs. They demonstrate the continued commitment to debt reduction.

Structural reforms drive investment growth

Structural reforms are easing long-standing constraints on investment. They encourage more businesses to operate within the formal economy. Improvements include tax administration, business licensing, and insolvency procedures. The justice system, land management, and labour taxation have also seen progress.

Private investment accounted for nearly two-thirds of the investment-to-GDP ratio increase since 2020. This suggests the recovery is broader than a temporary boost. The Recovery and Resilience Facility reinforced an investment recovery already under way. Digitalisation of transactions reduced opportunities for under-reporting income.

VAT compliance gap narrows significantly

Greece's estimated VAT compliance gap fell to approximately 9 percent in 2024. This is a sharp drop from 24 percent in 2019. Digitalisation of transactions and employment has reduced under-reporting. Moody's notes that the strength of evidence varies across reform areas. However, the breadth of positive signals increases the likelihood of significant cumulative effects.

The agency estimates Greece's potential growth rate at around 1.5 percent. The ongoing structural transition increases the possibility that growth will exceed expectations. High public debt and large external deficits remain challenges. A deeply negative net international investment position also weighs on the credit profile.