Fitch Revises Greece’s Outlook to Positive as Fiscal Outperformance Exceeds Expectations

Fitch Ratings has upgraded Greece’s Long-Term Foreign-Currency Issuer Default Rating (IDR) Outlook to Positive from Stable, reaffirming the rating at ‘BBB-’, citing strong fiscal performance and improved debt dynamics. The upgrade follows Greece’s better-than-expected budgetary results for 2024, which included a budget surplus of 1.3 percent of GDP and a primary surplus of 4.8 percent—significantly above the government’s initial target of just one percent. This performance exceeded Fitch’s projections and marks a significant improvement from the 1.4 percent budget deficit recorded in 2023. Compared to its peers, Greece’s result stands out against the current ‘BBB’ median deficit of 3.7 percent.

Fitch attributes this outperformance to structural improvements in fiscal policy, particularly more effective tax collection stemming from earlier reforms, coupled with stringent control over public spending. With this solid fiscal base, the agency projects Greece will maintain budget surpluses through 2025 and 2026, although these are expected to fall below the one percent mark. The Greek government, meanwhile, has announced a fiscal easing package in April 2025 amounting to one billion euros, or 0.5 percent of GDP, aimed at boosting investment and providing support to pensioners and home renters.

A combination of fiscal discipline and steady economic growth has driven a sharp reduction in Greece’s gross general government debt. In 2024, the debt-to-GDP ratio fell by ten percentage points to 154 percent. While this remains nearly three times higher than the median 52 percent for countries rated ‘BBB’, it still represents a drop of over 50 percentage points from the 2020 pandemic peak of 209 percent. According to Fitch, “Greece has achieved the largest post-pandemic debt decline among Fitch-rated investment-grade sovereigns.” The country’s sizable cash buffers—estimated at around €36 billion or 16 percent of GDP—are deemed sufficient to cover all debt maturities over the next three years. Fitch expects this trend of rapid debt reduction to persist, projecting a decline in the debt-to-GDP ratio toward 120 percent by the year 2030 under its baseline scenario.

Fitch emphasized that the 2024 fiscal results underline the Greek government’s “strong commitment to fiscal prudence.” The May 2025 revision of the medium-term fiscal framework further aligns national policy with the updated EU fiscal guidelines. One key variable—the cumulative growth of primary net expenditure for 2024–2025—has been revised down to 4.2 percent, a notable reduction from the previous 6.5 percent target. “We view the government’s commitment to small budget deficits and steady decline in debt/GDP to be highly credible, underpinned by the record of the post-pandemic period,” Fitch stated.

Political stability continues to support Greece’s fiscal trajectory. The New Democracy party, which secured victory in the 2023 elections, retains robust public backing. However, social tensions resurfaced in early 2025 due to dissatisfaction over the slow pace of the investigation into the February 2023 Tempi rail disaster, which triggered renewed protests. Fitch noted, “Beyond the direct political implications, public discontent could put more pressure on the government to ease the fiscal stance more substantially.”

Greece’s traditionally high defense expenditure—around 3 percent of GDP according to NATO definitions—means there is limited upward pressure in this area, reducing future fiscal risks compared to other EU member states.

On the economic front, Greece recorded real GDP growth of 2.3 percent in 2024, matching the 2023 rate. Growth was driven primarily by domestic demand, with household consumption buoyed by rising real incomes and strong job creation. Investment also remained robust, helped by disbursements from EU-funded Next Generation grants and loans. The contribution of net exports to growth was slightly negative due to the high import content of the country’s investment spending.

Fitch expects the Greek economy to continue expanding above trend, with growth forecast at over 2 percent for both 2025 and 2026. This projection far exceeds Fitch’s 0.4 percent growth outlook for the eurozone as a whole. While Greece is relatively insulated from direct fallout from global trade tensions—exports to the United States account for just 4 percent of total Greek exports, which is well below the EU average—Fitch warns that “a more severe shock to major EU economies could have substantial adverse effects in Greece.”

With a positive revision in outlook and clear signs of economic and fiscal progress, Fitch’s latest assessment points to growing confidence in Greece’s economic trajectory—while cautioning that continued discipline and political stability will be vital to maintaining this momentum.

By fLEXI tEAM