Greece’s efforts toward tax compliance, combined with resilient economic growth, allow it to continue exceeding its fiscal targets, according to S&P Global Ratings in its updated report following last night’s upgrade of Greece’s credit rating.

Despite a challenging external environment, according to most scenarios, Greece is expected to see more stable reductions in its net debt-to-GDP ratio—in the baseline scenario, this ratio is projected to decrease by an average of 6 percentage points annually over the next four years.

At the same time, the cash position of the Public Debt Management Agency (PDMA) provides Greece with an additional cushion which, at an estimated 15% of GDP, covers nearly three years of upcoming debt maturities.

As a result, the agency notes, we have raised our credit rating for Greece to “BBB/A-2” from “BBB-/A-3” with a stable outlook.

The stable outlook balances Greece’s solid economic and fiscal prospects against its high levels of external and public debt.

When Further Upgrades Might Come

We could raise the ratings if Greece’s external imbalances improved significantly. For example, this could happen if there were a noticeable reduction in the economy’s reliance on imports. We could also upgrade Greece if we observed a substantial reduction in external debt, much of which is public, the agency notes.
Negative Scenario

Conversely, the agency notes it could lower the ratings if Greece’s fiscal performance were to deteriorate significantly.

The Rationale Behind the Upgrade

Standard & Poor’s states that Greece significantly outperformed its 2024 fiscal targets. It is estimated that the government achieved a primary surplus of about 3.5% of GDP in 2024, which translates to an overall surplus of 0.5% of GDP. This is much higher than the original budgeted target of 2.1% of GDP.

Part of this outperformance is attributed to efforts in tax compliance, which once again supported the overperformance and is expected to continue supporting revenue growth this year.

The fiscal trajectory is well established. The government is projected to maintain primary surpluses averaging 2.7% of GDP over the 2025–2028 period.

Additionally, the “no-policy-change” forecasts continue to suggest positive cyclical benefits for Greece’s public finances—this gives the government substantial fiscal space to implement discretionary measures.

It is expected that the government will primarily direct additional revenue from windfalls toward strengthening public infrastructure investments, especially as NextGenEU funds begin to wind down from 2027.

Institutional and Economic Profile

Economic activity remains resilient.

We forecast average growth of 2.4% over the 2025–2026 period, driven by investments and private consumption. Economic expansion is expected to start cooling thereafter as the NextGenEU initiative begins to wind down.

With services—especially tourism and shipping—accounting for just under 70% of gross value added, they dominate the Greek economy. While shipping could prove vulnerable to a worsening trade war, we expect other service sectors to be less sensitive to external economic shocks compared to manufacturing.

Significant economic and fiscal reforms have made Greece’s economic trajectory more sustainable, though bottlenecks in areas such as the justice system remain a challenge.

Widespread protests marking the two-year anniversary of the Tempi rail disaster are unlikely to undermine political stability in the near term.

The Greek economy continued to outperform the Bank of Greece’s estimate for potential growth of 1.9%. Driven by strong investment activity fueled by NextGenEU, rising disposable incomes, and robust tourism demand, the overall increase in real GDP reached 2.3% in 2024. Not only did the economy exceed the central bank’s potential growth estimate, it also surpassed the eurozone’s overall growth of 0.9% last year.

Investment across the economy is increasing but remains below historical levels, and it is primarily fueled by public sector investments rather than private.

Moreover, a large share of private investment activity is in real estate—while tourism-related, it doesn’t as obviously boost productivity as other forms of capital stock investment.

Short-term prospects for the Greek labor market are positive.

We assess that the risk for Greece from new U.S. tariffs is manageable. Germany and Italy—Greece’s most important trade partners—are significantly more exposed to the impact of U.S. tariffs.

Greece’s manufacturing sector, whose importance has grown in recent years, exports a significant volume of intermediate goods to neighboring countries, including Germany and Italy.

In addition, Greece’s shipping sector will clearly be negatively affected by reduced global trade volumes, though re-exporting and rerouting strategies could be employed to mitigate overall impact. In any case, given the sector’s relatively low contribution to government revenue, a shock in shipping is unlikely to significantly affect public finances.

Despite the uncertain external environment, we expect economic activity to remain resilient in the coming years. Overall, GDP is still around 15% below its pre-debt crisis peak, suggesting room to continue outperforming its peers. Furthermore, NextGenEU spending is expected to rise significantly during 2025–2026.

Flexibility and Performance Profile: Economic momentum and fiscal discipline are reducing the government’s debt burden.

The government remains firmly committed to maintaining primary surpluses, which we expect to average 2.7% over the 2025–2028 period.

Net debt as a percentage of GDP remains high—estimated at 137% by the end of 2024—though debt risks are mitigated by the very long average maturity and extensive interest rate hedging.

External imbalances persist—we expect the current account deficit to remain elevated as import-heavy investment activity outpaces export growth.

Risks to the Greek banking system have receded.

Elsewhere in the report, regarding Greek banks, the agency notes that sectoral risks in the Greek banking system have receded, and Greek banks have entered a new phase of stability and growth.

Greece’s institutional and regulatory policy framework has become more aligned with eurozone standards, bolstered by the Bank of Greece’s proactive supervision, macroprudential measures, and the successful resolution of non-performing exposures (NPEs)—mainly via the Hercules asset protection scheme.

Although non-performing exposures have largely been transferred from banks’ balance sheets to specialized credit servicing firms, the overall stock within Greece’s financial system remains persistently high. In some cases, judicial bottlenecks have delayed resolution, preventing borrowers from accessing new financing and potentially undermining GDP growth, the agency concludes.