Portugal’s rating on the up?

By TPN/Lusa, in Business · 07-02-2020 01:00:00 · 0 Comments
Portugal’s rating on the up?

The Fitch agency may improve Portugal’s rating this year following the advances made by the country in public finances and in the expectation that public debt reduction will be maintained over the medium term.

According to Fitch analyst Michele Napolitano, the positive outlook considers an agency estimate that the Portuguese GDP will grow by 1.7 percent this year (after the estimated growth of 1.9 percent in 2019) due to the moderation of private consumption. Fitch currently evaluates Portugal’s public debt at “BBB”, the second investment-grade level, with a positive outlook and the next rating action for Portugal is scheduled for May.
On the positive side, Fitch highlighted the commitment to the budget surplus assumed by the government, a “very positive” aspect for the assessment of the country’s rating according to Michele Napolitano.
Among the risks to be considered, the analyst pointed out that the slowdown of the external economy may penalise the country and, consequently, the public accounts.
The pressure on the financial sector is still a risk, with Fitch attentive to any situation that could cause instability in the sector and penalise the country’s rating.
In November, in a reaction to Fitch’s maintenance of Portugal’s rating with a positive outlook, the Ministry of Finance highlighted that the decision anticipates future rating increases.

Finance minister Mário Centeno said that the Fitch agency highlights the maintenance of political and institutional stability, and the higher level of per capita income as strengths of the Portuguese economy, compared with other economies with the same rating, also reiterating confidence in the government’s economic and fiscal policy options.
In the document, the Finance Department also stressed that, regarding the orientation of public finances, Fitch monitors the government’s prospects for the budget balance, for the sustained reduction of the public debt ratio and a prudent debt management strategy, which involves extending the average maturity of debt securities, diversifying the investor base and maintaining an adequate liquidity cushion.
The ministry pointed out, at the time, that Fitch highlighted the robustness of the banking system, where there were significant advances in reducing the bad debt ratio, identifying limited risks to financial stability.
Earlier, on 4 October, Mário Centeno told Lusa that Portugal’s rating could soon rise to higher levels.
On that date, DBRS upgraded Portugal’s sovereign debt rating from BBB to BBB high, with a stable outlook.
On 13 September, Standard & Poor’s (S&P) revised its outlook on Portugal’s sovereign debt from stable to positive, keeping the rating of Portuguese debt at BBB.
On 9 August, Moody’s had raised the outlook for Portuguese public debt from stable to positive, keeping the rating at Baa3, one level above garbage.



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