This year’s Morgan Stanley analysis for Emerging Europe and the Middle East (EEMEA) portrays an image of Greece that goes far beyond the narrow perspective of emerging markets. In the new EEMEA Outlook, Morgan Stanley places particular emphasis on Greece not only at the country level but also at the level of individual stocks, giving it an “outperform” recommendation for the new year — ranking it second among the 12 markets it analyzes.

Greek equities consistently appear in top positions, confirming that the country’s investment narrative now has substantial depth. One of the key findings of the analysis is the continuous presence of Greek banks in the top models that evaluate quality, momentum, and balance sheets. Alpha Bank, Eurobank, National Bank of Greece, and Piraeus Bank score highly on combined criteria such as earnings stability, revision potential, capital strength, and return on equity. Morgan Stanley notes that Greek banks now exhibit the characteristics of mature European financial institutions, with valuations that have converged, yet still have room for further convergence in their cost of equity.

The picture becomes even more impressive when one examines the companies with the strongest upward earnings momentum. Eurobank ranks among the highest positions across the entire EEMEA region, thanks to continuous upgrades in its profitability estimates. Piraeus Bank also shows one of the strongest rates of positive revisions, confirming the strengthening trajectory of its fundamental metrics. In the same context, two non-financial Greek companies stand out: Metlen, which records steady upward revisions due to the rise in its international activities, and HelleniQ Energy, which shows significant improvement in earnings estimates as the refining and energy environment stabilizes at higher equilibrium levels.

The consistent presence of Greek stocks in the top positions of these quantitative tools is not considered coincidental. According to Morgan Stanley, it reflects the broader upgrade of the corporate sector, which is achieving sustainable profitability rates, high operating leverage, and clearly improved balance-sheet quality. The earnings momentum of Greek listed companies is among the strongest in the entire EEMEA region, with catalysts coming from different sectors and not only from banks.

The analysis concludes that the presence of Greek equities in Morgan Stanley’s top screenings confirms that the outperformance of the Greek market is not supported by cyclical factors, but by a combined picture of fundamentals, profitability, and strong investment visibility. It is one of the few cases where an emerging European market exhibits characteristics of a mature economy and corporate structure, resulting in particularly high scores in Morgan Stanley’s models.

Strong and steady growth

Despite the government’s momentum and the recent performance of the market, Morgan Stanley notes that Greek valuations have not reached saturation. The discount relative to Europe in earnings terms remains large, while the dividend yield stands above its historical average. In other words, Greece does not appear to be an overvalued market nearing the end of its cycle — but a market that continues to offer value.

Morgan Stanley estimates that the country’s GDP will grow at around 2% in 2026 and 2027, rates twice as high as the forecasts for the Eurozone. This difference does not arise from cyclical factors. Consumption remains stable, as disposable income is supported by the labor market and investments. Tourism acts as a powerful stabilizing factor against external pressures, with revenues having settled at levels higher than the ten-year average.

One of the most characteristic elements of the analysis is the following: Greece has received significantly high resources from the RRF, but disbursements lag in timing. This creates a peculiar “reservoir” of investment activity that does not run out when the disbursements end. Instead, projects that have been planned or contracted will continue to affect GDP even in 2027. This time lag is not a weakness; it is an advantage because it increases the predictability of investment activity over the long term.

The potential upgrade of Greece to an MSCI Developed Market

While the country’s fundamental picture is stronger than ever, Morgan Stanley highlights an unusual risk: the transition of Greece from the emerging-markets index to the developed-markets index.

This upgrade, despite its positive signal, may create short-term pressures, as has happened historically. When Greece was upgraded for the first time, the market experienced a period of underperformance lasting almost a year. The same happened — but in reverse — when the country was downgraded again, which then led to a period of strong outperformance.

The explanation is purely technical: Greece holds a significant weight in emerging-market indices, but only a minuscule share in developed-market indices. Thus, passive funds tracking EEMEA will need to reduce positions, while the corresponding European funds will find it difficult to fill this gap. Nothing fundamental changes in the economy; something fundamental changes in the flows. And this can cause temporary pressure.