Concerning Moody’s, it currently assigns Portugal the lowest rating among agencies rating the country, at Baa2 with a positive outlook, according to Filipe Silva, Investment Director at Banco Carregosa.
Silva highlights that Portugal “has maintained growth, supported by exports and tourism, despite the global slowdown”, while simultaneously, “the debt-to-GDP ratio has decreased, falling below 100%, offering greater confidence to investors, which is reflected in the spread” that the country currently has “versus Germany, 50 basis points.”
The expectation is for Moody’s to upgrade Portugal’s rating and maintain the positive outlook.
Filipe Garcia, an economist at IMF – Informação de Mercados Financeiros, also notes that “Moody’s has not changed the rating or outlook since November 2023, quite some time ago.”
According to Garcia, “there are conditions for Moody’s to upgrade the rating, even if it maintains a stable outlook since November 2023”, while also acknowledging that the agency might opt to improve only the outlook, “considering the current electoral process with an uncertain outcome following the fall of a government that lasted only a year, contrasting with previous political stability.”
Thus, Garcia believes “Moody’s has all the conditions to raise the rating to A2 but might only upgrade the outlook if it considers it safer to await the election outcome and developments in the trade war.”
On the other hand, Vítor Madeira, an analyst at Xtb, suggests that Moody’s should maintain the rating, considering that despite the reduction in the debt ratio and the ability to meet credit obligations with creditors, there are some signs of economic slowdown and “relevant political instability.”
This instability “could trigger failures in the State’s budget compliance and create higher budget deficits” and also “delay or even cancel PRR projects, which could impact the country’s economy.”
Regarding Scope, analysts expect the ‘A’ rating to remain, but Filipe Silva believes it could have a positive outlook, while Vítor Madeira suggests the outlook could be stable.
This year, both DBRS and S&P improved the sovereign debt rating in their reviews, which occurred before the political crisis, while Fitch maintained Portugal’s rating at ‘A-‘.
The rating is an evaluation assigned by financial rating agencies, significantly impacting the financing of countries and companies, as it assesses credit risk.
