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Morningstar DBRS Affirms Greece’s Stable Credit Profile Amid Robust Economic Growth

Stable Ratings Backed by Credible Policy Framework

The rating agency Morningstar DBRS has confirmed Greece’s long-term issuer ratings at BBB for both foreign and local currency debt, while also affirming the country’s short-term issuer ratings at R-2 (high). All ratings maintain a stable outlook, reflecting a balance in short-term credit risks.

Strong Economic Performance Driving Optimism

The agency’s report highlights Greece’s impressive economic performance, noting a 2.3 percent growth in 2024—well above the euro area average of 0.9 percent. This robust domestic demand, underpinned by employment gains and EU-funded investments, has been the key driver of GDP expansion. The European Commission forecasts similar growth for 2025, reinforcing a positive economic outlook.

Fiscal Discipline And Structural Reforms Strengthening Confidence

Greece’s steady economic progress has been complemented by recurring primary budget surpluses and a consistent decline in its debt-to-GDP ratio, with projections suggesting a drop from 164 percent in 2023 to 141 percent by 2026. Morningstar DBRS attributes the BBB ratings to Greece’s credible policy framework, membership in the European Union, and commitment to reforms that bolster governance, improve the business environment, and enhance debt sustainability.

External Risks And Future Considerations

Despite these positives, the agency cautions that Greece remains exposed to external risks common across EU economies. Any shift in the geopolitical or global trade environment that dampens external demand could impact exports and the broader economic landscape. An upgrade in credit ratings may be achieved with further reductions in the public debt ratio and sustained primary surpluses, while any prolonged fiscal weakness or reversal of reforms could lead to a downgrade.

Outlook For Long-Term Fiscal Sustainability

Looking ahead, the International Monetary Fund projects that Greece’s primary budget surplus will average 2.4 percent of GDP through the end of the decade, with public debt expected to fall to 125 percent of GDP by 2030. However, the ratings remain constrained by the country’s high public debt, small economic size, and sizable current account deficit. A prudent fiscal approach and ongoing economic reforms will be crucial to ensuring Greece’s sustained creditworthiness.

AI Spending Is Complicating The Fed’s Fight Against Inflation

Silicon Valley leaders have long argued that artificial intelligence will make technology and services dramatically cheaper. OpenAI CEO Sam Altman has described a future where intelligence becomes extremely inexpensive, while Tesla and SpaceX CEO Elon Musk has predicted that AI and robotics will create greater abundance and drive down costs.

So far, those benefits have yet to materialise at scale. AI adoption remains relatively slow, while the enormous investment needed for data centres and AI infrastructure is putting pressure on electricity prices, supply chains and other costs. For the Federal Reserve, this creates a difficult balancing act: AI could eventually boost productivity and reduce inflation, but its current buildout is contributing to higher prices.

OpenAI chief economist Ronnie Chatterji said AI needs to be adopted by organisations and generate measurable value before its broader economic impact becomes visible in productivity statistics.

AI Adoption Remains Uneven

Capital spending on AI infrastructure in the U.S. is expected to reach $581 billion this year, according to Goldman Sachs Research, with global investment potentially reaching $1 trillion.

Despite the scale of spending, adoption remains far from universal. A May survey by the U.S. Census Bureau found that 17% to 20% of U.S. businesses reported using AI, with adoption significantly higher among large companies.

Companies that have implemented AI at scale also highlight the challenges. Julie Averill, former CIO of Lululemon, said successful deployment requires changes in employee behaviour and trust in the technology. OpenAI has observed a similar divide: its most advanced business users deploy AI at around eight times the rate of average companies.

Why Productivity Gains May Take Time

Economists point to the limits of automation. AI can perform individual tasks effectively, but many jobs combine tasks that are difficult to automate.

Stanford professor Charles Jones refers to these as “weak links”. Radiology, for example, involves interpreting scans but also communicating with patients and working with colleagues. AI can automate part of the job without eliminating the profession itself.

As a result, the full economic impact of AI may not become clear until businesses adopt the technology more broadly and reorganise their operations around it.

AI Adds To The Fed’s Policy Challenge

AI’s economic impact has become part of the Federal Reserve’s policy debate. Fed Chairman Kevin Warsh has argued that AI could eventually become a significant disinflationary force by increasing productivity and strengthening U.S. competitiveness.

Other officials are more cautious. In July, the Fed kept interest rates at 3.5% to 3.75%, while some officials expressed concern that AI infrastructure spending could add to inflationary pressures.

Minneapolis Fed President Neel Kashkari pointed to massive data-centre investment as a new source of demand. Household electricity prices rose 10% in the two years through July, compared with a 6.2% increase in overall consumer prices. Meanwhile, shortages of chips and other AI components are pushing up costs. JPMorgan Chase estimates that DRAM prices could rise 400% by the end of 2026 compared with 2024.

Warsh has consequently adopted a more cautious tone, saying that while AI investment is laying the groundwork for future growth, the timing and scale of its economic effects remain difficult to predict.

For the Fed, the challenge is clear: AI could eventually deliver major productivity gains, but the cost of building that future is already showing up in the economy.

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