DBRS maintains Portugal’s rating at the seventh highest level – Obligations
DBRS, the Canadian financial rating agency that last August raised the “rating” of Portuguese sovereign debt from B (high) to A (low) – the seventh highest level – and which revised the outlook for the evolution of quality of credit, from ‘positive’ to stable’, continued this Friday to classify the “outlook” of the Republic.
“The confirmation of the rating and the trend reflects the perspective of DBRS that external risks to economic performance are balanced by the continuous improvement of metrics for public finances”, underlines the agency’s report.
He continues: “After several GDP contractions in 2020, growth resumed robustly in 2021 and in the first half of 2022”.
However, the scenario changed between July and December. “The price shock exacerbated by Russia’s invasion of Ukraine and the corresponding rise in interest rates led growth to decelerate sharply in the second half of 2022”, says the agency, which, even so, expects growth to be positive – although “slightly below trend”.
The DBRS also points to a praised path: “despite the recurring economic shocks, the budget deficit declined again in 2022 and remains below the Eurozone average”.
In addition, he underlined, “positive growth and the rapid recovery of public accounts allowed the ratio of public debt to GDP to return to its trajectory of sharp regression”. The agency also says that it expects this ratio to drop to around 100% by the middle of this decade.
The Canadian agency recalls that the rating is also supported by the fact that Portugal is a member of the Eurozone and belongs to the European Union’s economic governance structure, “which helps to promote credible and sustainable macroeconomic policies”. “However, there are important vulnerabilities, namely the high public debt and the relatively low potential for economic growth”. These problems, he warns, could become more challenging to manage if the adverse consequences of the crisis linger”.
DBRS also says that Portugal’s rating could be subject to an “upgrade” if the Portuguese authorities manage to reinforce the country’s resilience and economic growth potential, or if they achieve an additional significant reduction in the public debt ratio. On the contrary, the rating could be lowered if the political commitment to macroeconomic policies allows it to lose strength, generated in a worse perspective for public finances.
(news last updated at 22:19)