Portugal’s credit quality (debt grade or rating) remained the same, at the Baa2 level, but Moody’s took a step forward to raise the Republic’s assessment to Baa1 next November. According to a note that was just released this Friday night, the outlook (outlook) of the rating rose from stable to positive.
“Moody’s Investors Service today amended [sexta-feira, 19 de maio] the outlook of the Government of Portugal from stable to positive and confirmed the issuer’s long-term ratings in foreign and local currency and the senior unsecured ratings at Baa2”, says an official source.
“The decision to change the outlook to positive reflects the growing likelihood that a long period of economic and budgetary reforms, the deleveraging of households and non-financial corporations and the repair of the banking sector will result in a continued and sustained improvement in the credit profile, in particular with regard to economic and budgetary soundness”, explains Moody’s.
The rating could also benefit from “investments and reforms that prove to be effective in boosting Portugal’s economic growth potential in the medium term”.
The maintenance of the rating at Baa2 (it has been there since September 2021, two levels above the speculative or “junk” grade) reflects “the significant diversification of the Portuguese economy, a relatively high level of wealth and a high institutional soundness with a debt burden still high and exposure”, factors that offset the “risks of events related to the banking sector and geopolitical risks”.
Juxtaposing the pros and cons, Moody’s considers that the balance tends more towards the positive side, not least because of several recent indicators that the economy has shown (growth above expectations due to explosive tourism, much lower deficit, very high debt , but falling faster).
That’s what Standard & Poor’s did, last March 10th, and Fitch, on April 14th.
According to Moody’s agenda, the idea is to reassess the Portuguese Republic’s credit quality on November 17, about a month after next year’s State Budget (OE2024) is announced.
An improvement in the outlook and, above all, in the rating, is important for Portugal as it helps to moderate the rise in interest rates charged to the country and facilitates the reduction of the huge pile of debt (public and private), for example.
(updated 10:30 pm)
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2023-05-19 20:49:00