Picture: John Kolesidis / Reuters

Paris - Fitch ratings agency on Friday upgraded Greece's credit rating to “B” from “B-”, forecasting the economy will return to growth this year for the first time since 2008.

The decision to upgrade reflects the efforts made by the government to tackle its budget deficit, the agency said in a statement.

“Greece's deficit reduction over the past four years... has been remarkable,” Fitch said.

“The economy is bottoming out,” the report continued, forecasting the gross domestic product (GDP) would grow by 0.5

percent this year and by 2.5 percent in 2015.

Greece's economy shrank 1.1 percent in the first quarter of 2014 on a 12-month basis.

The coalition government of Prime Minister Antonis Samaras is trying to persuade critics at home that four years of gruelling austerity under an EU-IMF bailout programme are now bearing fruit.

But the Greek central bank has warned that political stability is needed to protect the fragile recovery.

Greece has undertaken four years of painful reforms in exchange for two international bailout packages in 2010 and 2012 worth a total of 240 billion euros.

The fiscal reforms have brought upgrades to the country's debt standing by ratings agencies in recent months, but Greek bonds still remain classified as junk.

In April Greece returned to medium-term international bond markets for the first time in four years, raising 3.0 billion euros at under 5.0 percent in a successful five-year issue. - Sapa-AFP