Moody’s Ratings has raised its outlook on Greece’s sovereign credit rating to positive from stable, while affirming the country’s Baa3 investment-grade rating, citing growing evidence that structural economic and institutional reforms are strengthening resilience.

The agency said the improvements in economic and fiscal resilience were exceeding its current expectations, potentially raising Greece’s structural growth rate and strengthening the government’s ability to continue reducing public debt.

“The greater resilience will strengthen the government’s ability to maintain the multi-year debt reduction process,” Moody’s said, including through further early repayments of debt accumulated during the financial crisis.

The positive outlook also reflected growing, although not yet certain, confidence that recent fiscal gains and political support for continued debt reduction would prove resilient through economic cycles.

Moody’s said Greece’s Baa3 rating reflected its track record of reforms, favourable structural debt sustainability indicators and significant improvements in public finances.

However, it also pointed to high public debt, large external deficits, moderate productivity and a substantial stock of distressed debt outside the banking system as continuing challenges.

The agency said structural reforms were gradually easing long-standing constraints on investment and resource allocation, while encouraging more businesses to operate within the formal economy.

It pointed to improvements in tax administration, business licensing, insolvency procedures, the justice system, land management, spatial planning, labour taxation and skills policy.

These changes were accompanied by stronger employment and exports and healthier private sector balance sheets.

“The strength of the evidence varies across reform areas and remains uncertain in several of them, but the breadth of these positive signals increases the likelihood that their cumulative effect will prove significant for Greece’s credit profile,” Moody’s said.

The agency also said Greece’s growth model had become more investment-focused and increasingly supportive of productivity.

Private investment accounted for almost two-thirds of the five percentage point increase in the investment-to-GDP ratio since 2020, suggesting the recovery was broader than a temporary boost from the Recovery and Resilience Facility.

“The latest support from the RRF, through grants, subsidised loans and complementary public infrastructure, is therefore more likely to have reinforced an investment recovery that was already under way, rather than caused it,” Moody’s said.

The agency estimated Greece’s potential growth rate at around 1.5 per cent, saying the ongoing structural transition increased the possibility that growth and fiscal resilience could exceed its current expectations.

Public debt fell to 146.1 per cent of GDP in 2025, from 154.2 per cent in 2024 and a peak of 209.4 per cent in 2020, with Moody’s forecasting a further decline to 120 per cent by 2030.

Primary budget surpluses of around 2.5-3.0 per cent of GDP are expected to support that decline.

Digitalisation of transactions and employment has also reduced opportunities for under-reporting income, with Greece’s estimated VAT compliance gap falling to around 9 per cent in 2024, from 24 per cent in 2019.

Greece repaid €5.30 billion of debt early at the end of 2025 and plans to repay a further €13.00 billion by the end of 2026.

“The early repayment reduces gross debt and future debt servicing needs and demonstrates the continued commitment to debt reduction,” Moody’s said.

The agency said Greece’s credit strengths included its reform record, dynamic growth and rapidly declining public debt burden.

It nevertheless warned that a deeply negative net international investment position and long-term demographic pressures would weigh on labour supply and medium-term growth.

While Greek banks no longer carried high levels of non-performing loans, Moody’s said a significant amount of distressed debt remained elsewhere in the economy.

Greek debt would also remain among the highest of all countries rated by Moody’s until the end of the decade, although its structure limits the country’s exposure to global interest rate increases.