GREECE
Maro/Political:
- DBRS maintained Greece’s credit rating at BBB, while changing the trend from Stable to Positive. According to the agency, Greece’s rating was maintained at the same level as primary surpluses are likely to remain large, with Greece posting much stronger fiscal results than most other EU countries in recent years. Furthermore, the country’s public debt ratio remains very high but is on a clear downward trend, while economic growth is projected to remain comparatively strong, although structural challenges remain. The agency also commented that external imbalances remain large, with Greece’s large current account deficit and elevated negative net international investment position (NIIP) continuing to weigh on the credit profile. However, agency added that the financial condition of the banking sector remains strong. Finally, the credit rating agency highlighted that political stability is likely to remain high.
DBRS noted that the Positive trend reflects the agency’s view that the public debt ratio will continue to decline markedly in the coming years. Furthermore, the agency added that the Greek economy has so far weathered the energy price shock well, with tourist arrivals continuing to increase strongly during the first half of the year.
The agency will upgrade Greece if the public debt ratio declines broadly in line with expectations over the short term and remains on a firm downward trajectory over the medium term, supported by strong fiscal results, or if there is continued implementation of reforms that boost investment, thereby improving longer-term growth prospects. Morningstar DBRS could change the trend on the credit ratings back to Stable if the projected decline in the public debt ratio materially underperforms its expectations.
Morningstar DBRS could downgrade the credit ratings if a prolonged weakening of fiscal discipline or the materialisation of contingent liabilities puts the public debt ratio on a sustained upward trend, a reversal in structural reforms occurs, or there is a significant deterioration in Greece’s external position.
Source: DBRS
Markets:
- GEK TERNA will announce its financial results for 1H26 on Tuesday, 15 September.
Source: Euronext Athens
CYPRUS
Macro/Political:
- DBRS maintained Cyprus’s credit rating at A, while changing the trend from Stable to Positive. According to the agency, Cyprus’s rating was maintained at the same level as the risks to the economy from the conflict in the Middle East appear contained, with the economy proving more resilient to the war than expected. January-July tourist arrivals were down by roughly 8%, while harmonized HICP inflation increased by 4.4%, primarily due to the increase in the energy component and base effects on the index.
Furthermore, the credit rating rationale is based on fiscal performance being stronger than that of EU peers, even with support measures and tax reform; public debt-to-GDP remaining on a downward trajectory, the banking sector continuing to benefit from very large capital buffers, and a stable political environment supporting the credit ratings.
DBRS noted that the Positive trend reflects its view that Cyprus will maintain its strong fiscal position and continue reducing its public debt burden. Favourable economic growth prospects and sizeable structural fiscal surpluses are expected to help reduce the general government debt-to-GDP ratio from an expected 49.9% this year to below 40% by 2029.
The agency will upgrade Cyprus’s ratings if the public debt ratio declines in line with current expectations, if there is evidence of increased economic resilience and rising labour productivity levels, or both. The agency could also change the trend back to Stable if economic performance proves less resilient to external shocks and the projected decline in the public debt ratio materially underperforms its expectations. Meanwhile, the credit ratings could be downgraded if there is a significant deterioration in the public debt trajectory or if structural changes to the economy occur that weaken growth prospects.
Source: DBRS
