Moody’s Ratings has raised its outlook on Greece’s sovereign credit rating to positive from stable, while affirming the country’s Baa3 investment-grade rating, in a sign that the country’s reform agenda is beginning to translate into measurable credit strength.

The agency said Greece’s economic and fiscal resilience has been improving faster than it had anticipated, with reforms helping to support a higher structural growth rate and strengthen the government’s capacity to keep cutting public debt.

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Reforms Are Strengthening The Credit Case

Moody’s said the country’s greater resilience should help preserve the multi-year decline in debt, including through further early repayments of liabilities accumulated during the financial crisis.

The positive outlook also reflects increasing, though still incomplete, confidence that recent fiscal gains and political support for continued debt reduction will hold through the economic cycle.

Greece’s Baa3 rating, the agency said, is supported by a long record of reforms, favourable debt sustainability dynamics and a marked improvement in the public finances. But the credit profile is still constrained by high public debt, large external deficits, moderate productivity and a sizable stock of distressed debt outside the banking system.

Broader Reform Gains Are Beginning To Show

Moody’s said structural reforms are gradually easing long-standing barriers to investment and resource allocation, while bringing more businesses into the formal economy.

The agency pointed to progress in tax administration, business licensing, insolvency procedures, the justice system, land management, spatial planning, labour taxation and skills policy. Those changes have been accompanied by stronger employment, firmer exports and healthier private-sector balance sheets.

“The strength of the evidence varies across reform areas and remains uncertain in several of them, but the breadth of these positive signals increases the likelihood that their cumulative effect will prove significant for Greece’s credit profile,” Moody’s said.

An Investment-Led Growth Model Is Emerging

Moody’s also said Greece’s growth model has become more investment-focused and increasingly supportive of productivity. Private investment accounted for almost two-thirds of the five percentage point increase in the investment-to-GDP ratio since 2020, suggesting the recovery is broader than a temporary lift from the Recovery and Resilience Facility.

That matters. In effect, Moody’s argued that EU-backed support through grants, subsidised loans and complementary public infrastructure has reinforced an investment cycle already underway rather than creating it from scratch.

The agency estimated Greece’s potential growth rate at about 1.5 per cent, adding that the ongoing structural transition raises the possibility that both growth and fiscal resilience could outperform current expectations.

Debt Metrics Continue To Improve

Greece’s public debt fell to 146.1 per cent of GDP in 2025, down from 154.2 per cent in 2024 and far below the 209.4 per cent peak reached in 2020. Moody’s expects that ratio to decline further to 120 per cent by 2030.

Primary budget surpluses of roughly 2.5 per cent to 3.0 per cent of GDP are expected to support the reduction.

Digitalisation of transactions and employment has also reduced the scope for under-reporting income. Greece’s estimated VAT compliance gap fell to about 9 per cent in 2024 from 24 per cent in 2019, underscoring the impact of better enforcement and a more formalised economy.

Greece also repaid €5.3 billion of debt early at the end of 2025 and plans to repay a further €13 billion by the end of 2026. Moody’s said the move reduces gross debt and future servicing costs while signalling a continued commitment to balance-sheet repair.

Challenges Have Not Disappeared

Despite the upgraded outlook, Moody’s warned that Greece still faces structural headwinds. A deeply negative net international investment position and long-term demographic pressures will continue to weigh on labour supply and medium-term growth.

While Greek banks no longer carry the high levels of non-performing loans seen during the crisis, a substantial amount of distressed debt remains elsewhere in the economy. Greece’s debt burden is also likely to remain among the highest of all Moody’s-rated sovereigns through the end of the decade, even if its debt structure limits exposure to global interest rate shocks.

For investors, the message is clear: Greece is no longer simply a post-crisis recovery story. It is becoming a case study in whether sustained reform, fiscal discipline and investment-led growth can permanently alter a sovereign credit trajectory.