Recent credit rating upgrades confirm Greece is gradually closing investment-grade gap

The recent upgrades in Greece's sovereign credit rating and positive prospects by Standard & Poor's (S&P) and DBRS has brought the country closer to investment-grade normalcy compared to other Eurozone countries.

For the European Central Bank (ECB) in particular, an investment-grade rating by a single agency alone - S&P, Moody's, Fitch or DBRS - would be enough to open the way to the ECB buying Greek state bonds. Based on the latest ratings, Greece is three grades away from investment-grade in terms of S&P, DBRS and Fitch ratings, and four grades away in terms of Moody's rating.

Senior Director and Head of Western European Sovereigns at Fitch Ratings Michele Napolitano told a conference in Nicosia last week that for Greece to reach investment-grade level in the next 18 months is difficult but possible.

Both S&P and DBRS have said a further upgrade is possible, with positive prospects of the economy. At an upgrade it announced on October 25, raising Greece's sovereign credit rating to BB- from B+ and assigning a stable outlook, S&P had not ruled out the possibility of another upgrade the next 12 months, provided the government continued its structural reforms and fiscal prospects and reduced its nonperforming loans.

DBRS noted progress by Greece following its latest upgrade in May 2019, and commented on "a positive trend."

Fitch kept Greece's rating at BB- with stable outlook on August 2, a few weeks after national elections, while it waits for the implementation of the government's program. Napolitano said the rating agency would focus on four factors: a stable political climate, investments, state finances, and banks.

Moody's, usually slower to upgrade Greece's sovereign debt did approach closer to other agencies' evaluations in March, when it upgraded the country's rating by two grades from B3 and a positive outlook to B1 with a stable outlook. In its comments, Moody's said the country must accelerate investments to boost growth, and expand its reforms to improve the business climate. On October 30, it welcomed Greece's early repayment of part of its IMF loan as a positive development.