Fitch upgrades Portugal with stable outlook

Financial rating agency Fitch has decided to raise Portugal’s “rating” from “BBB” to “BBB+”, with “expectations” (expectations) stable.

The rating agency said in a statement: “Fitch Ratings has upgraded Portugal’s long-term rating from ‘BBB’ to ‘BBB+’. ‘Expectations’ are stable.”

This is the third improvement in Portugal’s rating, after DBRS and Standard & Poor’s also spoke in the same direction.

Fitch justified this decision by the fact that Portugal had a “prudent fiscal policy, despite significant external shocks”.

On the other hand, he indicated that the budget deficit should meet the government’s target of 1.9% of GDP this year, compared to 2.8% in 2021 and 5.8% in 2020.

Although he emphasized that the budget results indicate better performance, he expected a setback in the second half of the year.

Fitch also estimates that Portugal’s debt ratio has fallen by 10.5 percentage points this year.

“One budget discipline history From the current ruling party supports Fitch’s basis for continued debt decline, and forecast primary fiscal surpluses of 0.2% of GDP this year and 1.5% in 2023.

Thus, he noted that “despite headwinds from high inflation and a weak external environment,” fiscal policy is expected to remain in line with the government’s debt targets.

The reported improvement also reflects indicators of Portugal’s governance and “per capita” GDP, above the average of its peers.

The rating agency also expects Portugal’s GDP is growing by 6.4% this yearcompared to 5.5% in 2021, driven by a “strong recovery in the tourism sector”.

add to Decrease in the unemployment rate And the consequent increase in the number of workers, beyond the levels of the Corona virus before the outbreak of the epidemic.

However, “with the European energy crisis, high inflation and tighter monetary policy, we expect a slowdown in the economy from the second half of the year.”

Hence, it is appreciated Low household purchasing power And that the activity of the private sector is moderate.

For 2023, Fitch expects a slowdown in GDP growth to 1%, followed by a rebound to 2.2% in 2024.

In the document released today, the agency also warned that Portugal remains vulnerable to global commodity prices, despite “limited direct exposure to the energy supply shock in Europe”.

Fitch also said that a sudden and significant increase in interest rates could affect families, especially due to mortgage loans, although there are some mitigating factors.

The next and final agency set to look into Portugal’s rating is Moody’s, on November 18.

“Rating” is an assessment that financial rating agencies attribute to a significant impact on country and corporate finance, as it assesses credit risk.

However, rating agency calendars are only indicative, and you may choose not to comment on scheduled dates or proceed with an unscheduled rating.