Moody’s upgrades Greece to Caa2

Moody's Investors Service said it upgraded Greece's long-term issuer rating as well as all senior unsecured bond and program ratings to Caa2 and provisional Caa2 from Caa3 and provisional Caa3, respectively.

The outlook was changed to positive from stable.

Greece's short-term ratings have been affirmed, at Not Prime (NP) and provisional NP.

Moody’s said the key drivers for the action are:

• Successful conclusion of the second review under Greece's adjustment program and release of a tranche of €8.5 billion in the coming days. Beyond the near-term impact of allowing Greece to repay upcoming maturities, the agency said it considers the conclusion of the review to be a positive signal regarding the future path of the program, as it required the Greek government to legislate a number of important reform measures;

• Improved fiscal prospects on the back of 2016 fiscal outperformance, expected to lead soon to a reversal in the country's public debt ratio trend. The government posted a 2016 primary surplus of over 4% of GDP versus a target of 0.5% of GDP. Moody's expects the public debt ratio to stabilize this year at 179% of GDP, and to decline from 2018 onwards, on the back of continued substantial primary surpluses; and

• Tentative signs of the economy stabilizing. While it is too early to conclude that economic growth will be sustained, Moody's said it expects to see growth this year and next, after three years of stagnation and a cumulative loss in output of more than 27% since the onset of Greece's crisis.

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