Fitch Keeps Greece at BBB as External Imbalances Remain a Concern - GreekReporter.com

Fitch is the last of five major credit rating agencies recognized by the European Central Bank to assess Greece during the second half of 2026.

The new report has affirmed Greece's long-term foreign-currency credit rating at BBB with a stable outlook, recognizing the country's continued fiscal improvement, rapid reduction in public debt and resilient economic growth, while pointing to persistent structural weaknesses and external imbalances.

Nonetheless, Fitch removed the positive qualitative adjustment previously applied to its sovereign rating model, explaining that improvements in Greece's public finances are now fully reflected in the model itself.

Greece expected to drop from highest debt-to-GDP ratio in Eurozone

Greece's credit rating was supported by income per capita and governance indicators above the median for countries in the BBB category, as well as a credible policy framework anchored in its membership of the European Union and the eurozone, according to Fitch.

Strong fiscal performance, prudent economic policies and resilient growth have strengthened the country's economic fundamentals and accelerated the decline in public debt.

The rapid reduction in public debt has remained a key factor in supporting Greece's creditworthiness, as general government debt stood at 146.1 percent of gross domestic product (GDP) in 2025.

Fitch forecasts the debt-to-GDP ratio to drop further, reaching 124.6 percent by 2028, expected to be driven by substantial primary budget surpluses, solid nominal GDP growth, a favorable relationship between interest rates and economic growth, and active debt management, including early repayments of outstanding loans.

Although Greece's debt remains considerably above the median for countries rated BBB, Fitch expects the country to lose its position as the eurozone member with the highest debt-to-GDP ratio by the end of 2026, falling below Italy.

The strong fiscal performance is attributed to increased tax revenues, improved compliance, higher social contributions and expenditure control. It also noted that the government's fiscal policy framework, reinforced by the domestic fiscal rule adopted in 2025, provides an institutional safeguard against excessive spending.

The Greek economy is expected to expand by an average of 2 percent annually over 2026-2028, outperforming the eurozone average, primarily driven by investment and private consumption and supported by public investment, projects financed through the EU's NextGenerationEU recovery program and subsequent European funding.

However, investment-related implementation risks and an uncertain international environment could affect those growth prospects.

Greek economy weaknesses persist despite budget surpluses

Overall, Greece presents relatively low financing risks, and the government's cash buffer is forecast to reach approximately 12 percent of GDP in 2026, the report adds.

Although Fitch forecasts a general government surplus of 0.6 percent of GDP and primary surplus  3.6 percent of GDP in 2026, the report points out that further improvements in structural economic fundamentals will be necessary for a higher credit rating.

Despite the improvement in public finances, the agency forecasts a current account deficit equivalent to 6.5 percent of GDP in 2026, reflecting structurally low domestic savings and strong import demand associated with investment, the Athens-Macedonian News Agency observes.

Tourism receipts, foreign direct investment and European funding provide support, but are unlikely to substantially improve external indicators in the short term, while the country's dependence on imported energy also leaves the economy exposed to international price fluctuations.

Deferred tax credits and exposure to external shocks are also seen as vulnerabilities in the Greek banking sector.

A further substantial decline in public debt, sustained primary surpluses, stronger productive capacity and improved labor-market performance could support a future upgrade by Fitch.