That means many investors will hesitate to buy Greek government bonds — which, however, have rallied considerably in recent months amid improving economic data and a strong appetite for the comparably high returns Greek bonds offer.
Finance Minister Christos Staikouras welcomed the upgrade, noting that it brings Greek bonds closer to investment grade — under Fitch's rating system it's still two notches shy. Greece saw its credit ratings plunge in 2010, when it was revealed that key financial data had been previously misreported and the budget deficit would be several times the initial forecast. The country lost market access as investors shunned its bonds, and was forced to sign a series of international bailouts to keep afloat.
It's now back on its feet, with balanced finances and a growing economy, and has engaged in several successful bond issues. “Debt sustainability continues to improve, underpinned by a stable political backdrop, sustained GDP growth and a continuing track record of fiscal outperformance against targets,” Fitch said.
It added that the six-month-old center-right government “has made swift progress in reducing tax rates on labor and capital and starting to address banking sector asset quality issues.” Fitch said Greek government debt is set to decline steadily from the peak of 181.2% of GDP in 2018 to 161% by 2021, and forecast real GDP growth of 2.5% in 2020 and 2021, from 2.2% last year.