Portugal goes from 'junk' to 'A' rating in the assessment of the main rating agencies

Portugal's rating is near the highest levels among the major financial rating agencies, after eight years of being at "junk" status. This is after reducing debt and balancing public finances.

In recent years, governments have set themselves the goal of reducing public debt and achieving positive budget balances, or as close to them as possible. This goal has improved Portugal's image among investors.

Portugal's rating has followed this shift in public finance management. DBRS rates the sovereign debt at A (high), and Moody's at A3. Fitch currently has the rating at A-, but a review is scheduled for this Friday. On August 29, S&P upgraded its rating from "A" to "A+."

"Despite a highly uncertain trade and geopolitical environment, Portugal is expected to record moderate surpluses and will continue to improve its external financial metrics, characterized by significant economic deleveraging," the rating agency stated in its justification for the decision.

In a statement following S&P's decision to upgrade Portugal's rating, the Ministry of Finance stressed that the financial rating agency "is clear in stating that the rating improvement is a result of the prudent and solid fiscal policy that Portugal has followed, aligning itself with the Government in the perspective of a budget surplus this year."

The Government, quoted by the Lusa news agency, also highlighted that, “at this moment, in the S&P rating there are only nine countries in the eurozone with a higher rating than Portugal (Germany, Luxembourg, the Netherlands, Austria, Finland, France, Ireland, Belgium and Slovenia)”, and that “countries such as Spain and Italy currently have a lower rating”.

In 2017, the public debt ratio stood at 126% of Gross Domestic Product (GDP). Since then, there has been a downward trend, interrupted only by the pandemic in 2020, and then resumed. That year, Portugal recorded a budget deficit of 3% of GDP.

Currently, according to the most recent data available, public debt stood at 96.3% of GDP in the first quarter of the year and the budget surplus was 0.2% in that period.