Moody’s Investors Service (MCO) on Thursday downgraded the government bond ratings of Greece to A3 from A2 and placed them on review for further possible downgrade. The new rating places Greece four notches above ‘junk’ status.
The rating agency said that its decision was based on view that “there is a significant risk that debt may only stabilize at a higher and more costly level than previously estimated.” Pressures from a macroeconomic fundamentals perspective have been evident for the Greek economy in the past year and are expected to intensify as the year unfolds.
Sarah Carlson, VP-Senior Analyst in Moody’s Sovereign Risk Group and lead analyst for Greece said: “Although the Greek government appears to be on, or even ahead of, schedule in terms of the implementation of the actions laid out in its Stability and Growth Programme, the difficult macroeconomic and financial environment has made continued adherence to the programme considerably more challenging”.
According to Carlson, it is unlikely that the rating for the debt-laden country will remain at A3, “unless the government’s actions can restore confidence in the market and counteract the prevailing headwinds of high interest rates and low growth.”
Moody’s also put Greece’s Prime-1 short-term issuer rating under review for downgrade.