Fitch decided to keep Portugal’s rating unchanged at A-, but revised the outlook upwards to positive, as announced on Friday.
“The positive outlook reflects the Continued progress in reducing public debt.a history and commitment to a Prudent fiscal policy and continued external deleveraging.which reduce Portugal’s vulnerabilities,” Fitch said in a statement.
The financial rating agency expects that “moderate economic growth and a modest budget surplus will reduce Portugal’s public debt to 95.8% of GDP by the end of 202499.1% by the end of 2023.”
“We expect a continued reduction in debt to 88.1% in 2026, compared with the A average of 56.6% and 82.5% in 2028,” the agency said, which will be “driven by high primary surpluses and sustained growth.”
In its assessment of Portugal, Fitch also indicates that it expects a surplus of 0.2% of GDP in 2024, noting that the government “implemented spending and revenue measures aimed at meeting some long-standing social demands, but remains committed to maintaining modest surpluses over the medium term.”
The rating was maintained at A- taking into account that “Portugal’s ratings are also supported by governance indicators above the median Awith institutional forces backed by membership in the EU and the eurozone”, factors that are “balanced by high levels of public and external debt”.
As for economic forecasts, Fitch “expects GDP growth of 1.7% for 2024, compared to 2.3% in 2023, driven by private consumption and investment.”
The financial rating agency also highlights that “the The minority position of the centre-right PSD government creates political and political uncertaintyincluding in relation to the approval of the 2025 budget.”
“Even if the baseline scenario is for a budget to be in place, the government may have to rely on twelfths,” which “would require a tighter budget policy compared to the 2025 proposal, but would also lead to delays in implementing the policy,” Fitch notes, which still sees “a low risk of early elections next year.”
It was in September 2023 that Fitch raised Portugal’s rating from BBB+ to A-, with a stable outlook, a rating it maintained in March of this year, having now only improved the outlook.
The rating is an assessment given by financial rating agencies, with a great impact on the financing of countries and companies, since it evaluates credit risk.
Source: Observadora
