The Daily Update - Greek rating upgrade

On Friday the ratings agency Fitch upgraded Greece’s sovereign credit rating by one notch, from B- to B with a positive outlook. In a note, Fitch said it believes that the country’s general government debt sustainability had improved on steady economic growth and that there was a  reduction in political risks. This upgrade brings Fitch in-line with Standard and Poor's who upgraded Greece’s sovereign credit rating to B from B- in January.

The improvement in Greece’s sovereign credit rating comes after the European Commission released its outlook for the Mediterranean country earlier this month. In a report titled ‘The Greek economy grows again’ the Commission noted that GDP had grown by 1.1% in the first 3 quarters in 2017 and is projected to grow by 2.5% in both 2018 and 2019. ‘It is the first time since 2008 that the Greek economy is growing for three successive quarters’ the report said. Adding that in the coming years ‘A strong external demand is expected to offer a boost to net exports, which are expected to become a significant growth tool in 2018 and to support the reorientation of the economy towards the commerce sector’.

As regular readers know, at Stratton Street, the bond team have written time and time again on the reasons why we do not, and have never invested in countries like Greece. This is because we do not consider it a ‘wealthy nation’:  with massive net foreign liabilities of close to 150% of GDP, thus rated only 1 star on our Stratton Street Net Foreign Asset (NFA) scoring system. This is well below our cut off point of minus 50%.  So, as it stands at present, or indeed in the foreseeable future, we cannot see our views on the country changing.

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