Portugal’s ‘rating’ was at a level known as ‘garbage’, but after about eight years, it is now close to the highest levels in the main classifications of financial notation agencies, after reducing debt and balanced public accounts.
The Portuguese sovereign debt classification has been among the lowest levels after the crisis that removed investors and market confidence.
In recent years, the governments of António Costa and after Luís Montenegro have established as objective to reduce public debt and positive budget balances or as close as possible, which improved the image of Portugal before investors.
The ‘rating’ of Portugal has been following this change in public account management and now DBRs evaluates sovereign debt in A (elevated) and Moody’s in A3, while Fitch currently has A- classification, but with a review scheduled for this Friday, September 12
Already S&P was the last agency to evaluate the rating, on August 29, and improved the classification of ‘A’ to ‘, just six months after another climb, against the expectations of analysts heard by Lusa.
“Despite a highly uncertain commercial and geopolitical environment, Portugal is expected to record moderate surpluses and will continue to improve its external financial metrics, characterized by significant debacing of the economy,” said the financial notation agency, justifying the decision.
In a statement sent after the S&P decision to climb the rating of Portugal, the Ministry of Finance stressed that the financial notation agency “is clear in stating that the improvement of the rating results from the prudent and solid budgetary policy that Portugal has followed, aligning with the government from the perspective of a budget excess this year”.
The government also pointed out that, “at this time, in the S&P rating there are only nine eurozone countries with a higher notation than Portugal (Germany, Luxembourg, Netherlands, Austria, Finland, France, Ireland, Belgium and Slovenia)”, “countries such as Spain and Italy present a lower” lower rating. “
In an analysis, BPI Research points out that “the expectation of maintaining the consolidation of public finances was one of the reasons for ‘upgrade’ (improvement) made by S&P”, and the review was based on “the improvement of the external position of Portugal (even in a context of high uncertainty from US tariffs) and the commitment to the consolidation of public accounts, even in a context of persistent fragmentation of parliament Portuguese”.
“S&P also states that the public debt ratio should continue to decrease in the coming years, anticipating that it reaches 84% of GDP by 2028,” he reads.
Portugal’s classification is currently currently close to the highest levels, about eight years after leaving the ‘garbage’ level.
Each rating agency has its own evaluation scale, but in all the best classification is triple A (AAA) and letters C or D indicate evaluations in which investment is considered at risk or speculative (commonly designated ‘waste’).
It was in September 2017 that the Standard and Poor’s (S&P) Financial Notation Agency took Portugal out of ‘garbage’, reviewing the ‘rating’ attributed to the Portuguese sovereign debt of ‘BB+’ to ‘BBB-‘, a first level of investment.
In December of that same year, the Fitch removed Portugal from ‘garbage’, improving in two levels the ‘rating’ attributed to Portuguese public debt, from ‘BB+’ to ‘BBB’, the second level of the investment category.
Already Moody’s just removed the country from ‘garbage’ in October 2018, climbing the ‘rating’ from Portugal to ‘Baa3’.
In 2017, the public debt ratio was 126% of Gross Domestic Product (GDP), and there was a reduction trajectory that was only interrupted by the pandemic in 2020, but then resumed.
Already the public accounts were in ‘Red’, and in 2017 Portugal registered a budget deficit of 3% of GDP.
Currently, according to the most recent data available, public debt set at 96.3% of GDP in the first quarter of the year and the budget surplus was 0.2% in this period.
The rating is a classification assigned by the financial notation agencies that evaluates the credit risk (ability to pay the debt) of an issuer, which can be a country or a company.
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