European financial rating agency Scope on Friday maintained Portugal’s rating at A- and revised its outlook upwards, the agency said in a statement.
“The sustained reduction of debt, a prudent budgetary policy and the improvement of the external situation are the basis for the revision of the outlook,” the organization said, adding that “the still high public debt and the limited growth potential are the constraints.”
Thus, Scope “maintained today [esta sexta-feira] the long-term ratings of the issuer and the senior unsecured debt of the Portuguese Republic in local and foreign currency to A-, and revised the outlook to positive, from stable.”
Scope also maintained the issuer’s short-term ratings at S-1 in local and foreign currencies, with a stable outlook, it said.
“The revision of Portugal’s long-term credit ratings to positive reflects the country’s sustained debt reduction, a strong track record of prudent fiscal policy with budget surpluses expected for 2024 and 2025a robust sovereign debt profile and comparatively strong medium-term growth prospects, together with continued improvements in the external position,” Scope said.
The agency expects, for 2024, “a moderation of the primary surplus to 2.5% of GDP, compared to 3.4% of GDP in 2023, and that Portugal will record a budget surplus of 0.4% of GDP.”
According to the entity, “in the long term, Portugal’s fiscal flexibility should gradually decrease due to structurally higher social benefits, reflecting greater demand from an ageing population”, as well as “measures to alleviate social pressures related to high housing costs, as well as higher interest expenses, which are expected to increase from 1.9% of GDP in 2022 to 2.4% of GDP in 2025”.
Scope also sees risks to policy continuity in Portugal as “low”, noting that this “stability is supported by a consensus on fiscal prudence among the main political parties”.
The agency estimates that the Portuguese economy will grow by 1.9% in 2024 and accelerate to 2.2% in 2025, predicting that “growth will be driven mainly by exports and investments, with significant EU funds providing additional support.”
As for the risks highlighted by Scope, the agency points to a high level of public debt, demographic pressures due to an ageing population and the size of the economy.
Source: Observadora
