The Greek government bond rating was upgraded two notches to Caa1 by Moody’s Investors Service. The reason for the two-step upgrade from Caa3 was the country’s huge fiscal improvement over the past year.

The agency issued a news release outlining reasons for the upgrade: “The first factor behind the upgrade of Greece’s rating is Moody’s strengthened expectation that the general government debt to GDP ratio will start declining in 2015, after peaking this year according to Moody’s estimates at around 179 percent” of GDP.

“The government’s progress in fiscal consolidation under its economic adjustment program underscores the improvement in the debt trajectory,” said Moody’s  announcement.

Last year, Greece registered its first primary surplus since 2002 and the country’s budget deficit shrank to 3.2% according to the troika of international creditors and 12.7% according to Eurostat.

Moody’s, however, also pointed to the negative influences to the country’s economy, such as the political instability that comes from the coalition government’s eroding majority leading to a chance of early parliamentary elections in the first quarter of 2015.

A Caa1 rating is just one notch below high-credit risk. This means that despite the improvement, Greek government bonds still have “junk” status and are not considered safe for investment.

Moody’s decision to upgrade follows a similar move by US ratings agency Fitch in May.

“Fiscally, we have already taken most of the beating, but the road ahead remains tough,” said Greek Finance Minister Gikas Hardouvelis during a parliamentary committee debate on reforming the country’s tax collection system.

Analysts predict that the Greek economy will continue to improve with a 1.6% primary surplus expected for this year.