City of Athens enjoys fast-growing economy, despite weaknesses

In its annual report on the City of Athens, Moody’s Investors Service said the city’s A1 issuer rating, with stable outlook, reflects the Greek capital’s fast-growing economy, its satisfactory revenue profile, which features notable and growing own-source revenue streams, and its modest level of indebtedness — albeit set to rise in the following two years. The rating also factor in the city’s weak and volatile operating performance and its rigid and rapidly rising operating costs.

Almost 45% of the city’s operating revenue is derived from locally set taxes and charges, such as the fee for street-cleaning and lighting, which gives Athens revenue flexibility to face fiscal pressures as they arise.

“These have been steadily growing, thanks to the municipal administration’s recurrent rate hikes increasing in line with inflation, revenue collection improvements and the dynamic local economy,” said Simone Zampa, a Moody’s Vice President/Senior Analyst and co-author of the report.

“In spite of weak and volatile operating margins, Athens‘ overall budgetary position has improved over the past three years and its stock of debt has declined,” Zampa added.

“As the capital of Greece, Athens plays a key role as the financial, economic and political hub of the country. In recent years, Athens has experienced robust economic growth sustained by high rates of investment, mainly to enhance the transportation network — a process largely undertaken just before the Olympic Games,” highlighted Georgios Petsis, a Moody’s Associate Analyst and co-author of the report.

Athens‘ A1 rating also incorporates a moderate likelihood of extraordinary support from the central government should the city near a default situation — an unlikely scenario.