Fitch affirms Portugal’s BBB rating with stable outlook – Economy – RTP Madeira
The US agency states that Portugal’s BBB rating is the result of the balance between “its institutional communications, strong governance indicators and ‘per capita’ income superior to BBB rating peers” and “high public debt and weak external finances”.
“The impact of the pandemic shock on Portugal’s fiscal finances was less pronounced than Fitch anticipated bol. Recent fiscal numbers have been supported by a better-than-expected economic recovery, and a restrictive degree on the part of the Government on the size of response packages to the crisis”, analyzes the agency in the note now known.
Fitch notes that most of the pandemic support “has depended more on issuing state guarantees than on direct budget transfers”, which “provides to limit the short-term impact on the necessary deficit, despite being a potential contingent liability risk. for the public balance sheet”.
“We estimate that Portugal will reach a deficit of 4.4% [o Governo prevê 4,3%] after a deficit of 5.8% in 2020, “reveals the agency, which aligned with the Government in forecasting 3.2% in 2022.
Among Fitch’s downside risks are “the relative political misunderstandings of the sustainability of public servants, pension payments (especially the pension factor for newer pensions) and the pressure for greater support in the face of rising energy prices.”
The North American agency also points out that the Government’s State Budget proposal, which failed in parliament, “kept a moderately loose secondary position”, with a net negative impact of 0.5% of the Gross Domestic Product (GDP).
As for the debt, Fitch predicts that its reduction in 2022 “remains sustained by economic growth and a decrease in public deposits”, forecasting that it will reach 127.4% by the end of 2021 (above the Government’s forecast, 126.9%) and 123.9% in 2022 (the Government predicts 122.8%).
Fitch notes that national debt sustainability, the third-largest in the eurozone, is supported “by low interest costs (2.6% of GDP, 2021 estimate) and relatively long maturities (seven years, excluding EU loans). and the International Monetary Fund, at the end of September”.
“The ‘stock’ of state guarantees (including lines adopted in response to covid-19), estimated by Fitch at around 13.3% of GDP, remains a risk following. However, TAP (public airline) and the Novo Banco remain contingent liabilities for the sovereign, “points out the agency.
Fitch also expects the national economy to grow 4.5% this year (the Government points to 4.8%) and 5.4% in 2022 (the Government points to 5.5%).
“Domestic demand will drive GDP growth. The lifting of all covid-19 domestic restrictions in October, combined with an impressive vaccination rate (as of November 11, 2021, 91.5% of adults in Portugal were fully vaccinated, against an EU average of 75.6%), will give a boost to private consumption, above the best prospects in the labor market and reduction of accumulated savings”, foresees.
Fitch also expects there will be “significant influence coming from the use of NexGenerationEU”, estimating a 1.5 percentage point contribution to investment growth in the next year.
In tourism, Fitch points out that “the recovery is gradual”, and in addition to referring to the energy crisis and the measures taken by the Government, the agency points out that “the risk of prolonged or greater than expected information could slow down the economic recovery “
Fitch also warns of risks regarding “challenges before the previous stretch under moratorium” in the banking sector.
On September 17, the US rating agency Moody’s upgraded the Portuguese debt rating from Baa3 to Baa2 today, with a stable outlook, anticipating the expectation of an improvement in the economy’s growth in the long term.
Before, on September 10, Standard and Poor’s (S&P) did not comment today on the Portuguese debt ‘rating’, keeping it at the BBB investment level, the same happening with the stable outlook.
On August 27, Canadian agency DBRS Morningstar maintained the ‘rating’ of Portuguese public debt at “BBB” (high) with a stable outlook.
C / Portuguese