Moody’s Lifts Portugal Out of Junk Territory
Rating agency Moody’s on October 5th, 2018 pushed Portugal’s sovereign credit rating back into investment-grade territory for the first time since 2011, citing a decline in the country’s debt burden.
The agency raised Portugal’s rating one notch to Baa3 from Ba1 and changed its outlook to “stable” to “positive”.
Moody’s attributed the move to two factors:
- Portugal’s elevated general government debt has moved to a sustainable, albeit gradual, downward trend, with limited risks of reversal; and
- The broadening of Portugal’s growth drivers and a structurally improved external position has increased economic resilience.
Portugal’s government debt-to-GDP ratio slipped by 4.5 percentage points to 124.7 per cent of GDP in 2017, driven by strong economic growth and “healthy primary surplus”. Moody’s estimates the ratio will slip further to 116 per cent of GDP by 2021.
The economy has benefited from a broader upturn in Europe and stronger confidence among companies has also helped to support Portugal’s growth outlook.
“In Moody’s view, the recovery in investment spending, the rebalancing of the economy towards tradable and the improved political and banking sector stability has raised potential growth in Portugal to around 1.5% , stronger than in recent years (0.3% between 2010 and 2017),”the agency said.
Moody’s had left Portugal in the junk basket since 2011.
Source: Financial Times
