Standard & Poor's is preparing Portugal's rating and expects an 'A' rating after 13 years

Today, Standard & Poor's is evaluating Portuguese sovereign debt, and if the estimates are confirmed, Portugal may be able, after 13 years, to be classified by all rating agencies at levels “A”, which is the best classification.

“Standard & Poor's should raise the rating to A-, following what other agencies have already done,” IMF Head – Financial Markets Information Felipe Garcia revealed to Jornal Economico.

The analyst recalls that Standard & Poor's is the only institution that still adheres to Portugal's “beliefs.”

“The agency should highlight the very good development in public accounts, with a significant reduction in the debt burden/GDP and improved economic activity compared to the euro area average, leading to an improvement in the financial situation,” predicts Felipe García. Moreover, he adds, “the risks to the country have been constantly decreasing. Taking the spread versus Germany for a 10-year maturity as a reference, Portugal is ‘paying’ 65 basis points more than Germany, the lowest level in more than two years. It is also a very positive differential.” compared to other bond issuers in the euro area.”

“Compared to the last S&P assessment, in September 2023, the 10-year interest rate fell from 3.34% to 3.09%, the spread fell from 81.50 to 65 basis points and the debt-to-GDP ratio fell significantly,” the analyst concludes.

The Standard & Poor's rating will be made closer to March 10, when the legislative elections are held.

Felipe García explains that “the upcoming legislative elections did not have any impact on Portuguese debt.”

“As mentioned, the spread has decreased, now reaching its lowest level in two years, and interest rates have only increased due to the development of interest rates at the international level. The market perception is that all possible government solutions will continue to follow the path of at least having balanced budgets and trying to reduce the debt burden / GDP,” says the head of the International Monetary Fund – Financial Markets Information.

If the improvement occurs, S&P will align the rating with the other three major international financial rating agencies, which last year took the country out of the “B” levels and returned it to the “A” levels (within the “B” level). A scales vary between A-/A/A+ or A1/A2/A3).

The next agency to comment on Portugal will be Fitch on March 22.

Fitch currently rates Portugal's sovereign debt at “A-” with a stable outlook, and the DBRS at “A” with a stable outlook; Moody's rating is at A3, with a stable outlook.

A “rating” is an assessment provided by financial rating agencies, which has a significant impact on the finances of countries and companies, as it assesses credit risks.

Rating agencies' evaluations are only indicative, and they may choose not to comment on scheduled dates or to proceed with an unscheduled evaluation.

(updated)