Canadian rating agency Morningstar DBRS raised its outlook on Greece's creditworthiness from stable to positive on Thursday, while keeping the country's long-term credit rating unchanged at BBB.
The agency also affirmed Greece's short-term rating at R-2 (high), likewise upgrading the outlook on that rating from stable to positive.
Morningstar DBRS said the change reflects its assessment that Greece's public debt-to-GDP ratio will keep falling significantly in the coming years. The European Commission forecasts that gross general government debt will drop from 143.5% of GDP in March 2026 to 134.4% by the end of 2027, as economic growth remains comparatively strong and the government continues to post large primary surpluses.
The Greek economy has so far proven resilient to the energy shock, with tourist arrivals continuing to rise sharply in the first half of the year. The European Commission projects real GDP growth of 1.8% in 2026 and 1.6% in 2027.
Fiscal performance and debt reduction
Greece posted a primary surplus of 4.9% of GDP in 2025, compared with an average primary deficit of 1% across the rest of the European Union. The strong result came from spending restraint, particularly on public sector wages and social benefits, along with strong tax revenue growth driven by structural reforms, including the continuing digital transformation of tax administration.
Between 2019 and 2025, combined income tax and VAT revenue as a share of GDP rose by 3.2 percentage points. The European Commission expects the primary surplus to ease slightly to 4% of GDP in 2026 and 3.7% in 2027, mainly due to expansionary measures such as income tax cuts, pension increases and temporary energy support measures.
Gross general government debt stood at 143.5% of GDP in March 2026, down from 152.9% a year earlier, compared with a eurozone average of 88.9%. The Commission forecasts a further decline to 140.7% in 2026 and 134.4% in 2027, supported by strong nominal growth, a substantial primary surplus and early repayments of state debt, mainly loans under the Greek Loan Facility.
The weighted average maturity of general government debt stood at 18.3 years in June 2026, with much of the debt made up of favorable loans from official-sector lenders such as the European Stability Mechanism and the European Financial Stability Facility. Government cash reserves totaled 31.1 billion euros, equal to 12.4% of GDP, and 100% of Greek debt carries fixed interest rates after hedging.
State guarantees stood at 23.9 billion euros, or 9.5% of GDP, about 69% of which are linked to the "Hercules" bad-loan securitization program.
Growth outlook and tourism
Real GDP grew by an average of 2.1% a year between 2023 and 2025, supported by rising tourist arrivals, favorable labor market trends, and inflows of foreign direct investment and European funds. The European Commission expects growth to slow moderately to 1.8% in 2026 and 1.6% in 2027, still above the eurozone-wide forecasts of 0.9% in 2026 and 1.2% in 2027.
The slowdown next year is mainly attributed to softer private consumption, as a temporary rise in inflationary pressure from the energy shock weighs on household purchasing power despite government fiscal support measures. Tourism, by contrast, has kept its momentum, with arrivals up 15.4% year-on-year in the first half of 2026.
Travel services accounted for 89% of Greece's total net services exports in 2025, up from 73% in 2019, underlining the economy's reliance on tourism.
Productivity and current account gap
Morningstar DBRS flagged persistently low labor productivity as a constraint on the rating. According to Eurostat, nominal productivity per worker in Greece stood at just 67% of the EU-27 average in 2025 in purchasing power standard terms, though the agency said recent structural reforms have boosted competitiveness and should support productivity gains over the medium term.
Greece's current account deficit narrowed to 5.7% of GDP in 2025, from 7.2% in 2024, due to lower energy imports, but remains well above pre-pandemic levels. The Bank of Greece expects the deficit to widen again to 6.2% of GDP in 2026, before easing to 5.8% in 2027, as international energy prices rose following the outbreak of the war with Iran and strong domestic investment activity boosted imports of capital goods.
Gross external debt stood at 238% of GDP in March 2026, down from 243% a year earlier, while the economy's net international investment position was negative 133% of GDP. Morningstar DBRS noted that much of the external liabilities relate to public debt owed to official creditors at low interest rates with long maturities.
Banking sector strength
The Greek banking sector's resilience has improved significantly in recent years thanks to state support measures and the economic recovery. Asset quality benefited from the state-backed "Hercules" program, which removed old non-performing loans from bank balance sheets, pushing the sector's non-performing loan ratio down to 3.4% in March 2026 from 40.6% in December 2019.
Morningstar DBRS noted that management of problem loans transferred to loan servicers remains slow. The International Monetary Fund estimates non-performing loans still held outside the banking sector at 37% of GDP, which limits the pool of potential borrowers for domestic banks.
According to the European Banking Authority, the sector's average return on assets stood at 1.2% in the first quarter of 2026. Profit growth helped banks build capital buffers, with the CET1 ratio reaching 15.2% in the first quarter of 2026, up from 12.6% four years earlier. However, deferred tax credits still made up 40.1% of CET1 capital as of December 2025, a weakness in capital quality, though these are due to be phased out gradually by 2034.
Political backdrop
Greece's political environment has been marked by a high degree of stability in recent years, with the New Democracy government led by Prime Minister Kyriakos Mitsotakis holding a strong parliamentary majority since the 2023 election. This has allowed the adoption of structural reforms and the completion of targets under the EU Recovery and Resilience Facility.
The next parliamentary election must be held by the end of July 2027. Morningstar DBRS said current polling suggests government formation could prove difficult after that vote, but it does not expect major shifts in economic policy in the medium term, citing broad consensus among the main political parties on key policy issues, including fiscal policy.
Greece's institutional quality remains affected by weaknesses in governance, including lengthy judicial proceedings, with World Bank governance indicators for Greece lower than those of most EU countries, particularly on rule of law. Morningstar DBRS said institutional quality could improve in coming years from ongoing judicial reforms, including a revision of the court map and the land registry.
What could move the rating
Morningstar DBRS said it could upgrade Greece's rating if the debt-to-GDP ratio falls in line with forecasts in the short term and stays on a stable downward path over the medium term, backed by strong fiscal performance, or if reforms that boost investment and improve long-term growth prospects continue.
Conversely, the agency could revert the outlook to stable if the projected decline in the debt ratio falls significantly short of expectations. A downgrade could follow a prolonged weakening of fiscal discipline, the crystallization of contingent liabilities that would put public debt on a firmly rising path, a reversal of structural reforms, or a significant deterioration in Greece's external position.
