European financial rating agency Scope Ratings on Friday raised the Portuguese Republic’s sovereign debt rating, which moved from BBB+ to A-. With this “upgrade”, Portugal’s rating is now at Level 7 Good Investment – the same rating as assigned by Canada’s DBRS, but higher than Moody’s, Fitch’s and S&P’s.
The outlook (debt quality evolution perspective) changed from positive to stable. On May 13 last year, Scoop raised the forecast from stable to positive, after he repeated this situation in the October 28 assessment – and now, with the rating up, the “forecast” is returning to the previous level.
In the report released on Friday, Scoop bases his decision to upgrade the rating on the fact that Portugal is showing sustainable progress in budgetary fundamentals “supported by a strong commitment to prudent budget policy.”
This improvement is underlined by a stable decline in the budget deficit compared to its European counterparts, with Scope expecting this to continue over the medium term. “These developments support the state’s long-term fiscal sustainability, as they provide greater ability to manage budget pressures.”
Contributing to the decision to upgrade the rating was also the “continuous trend towards lowering the debt-to-GDP ratio in Portugal,” the report adds. “This positive development is further supported by Portugal’s strong growth performance and favorable debt characteristics. These factors have helped partially mitigate the increase in debt issuance costs and have contributed to reducing the country’s overall debt burden,” Scopp asserts.
The stable outlook designation reflects Scoop’s view that risks to Portugal’s rating are balanced over the next 12 to 18 months.
The next Scope assessment of Portugal will be on September 8th. The agency is recognized as an External Rating Agency (ECAI) in the European Union.
Scope Ratings was the first European financial rating agency to be authorized by the European Commission, in June last year, to rate its debt instruments.
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