The Investment Director of Banco Carregosa, Filipe Silva, stated that “Moody’s might upgrade Portugal’s credit rating, currently at A3, in its upcoming evaluation” set to be announced this Friday.
Silva explained that “such an upgrade would be driven by strong macroeconomic fundamentals, a series of budget surpluses, a rapid decline in the public debt/GDP ratio, improvement in the state’s financing profile, and a resilient labor market.” By doing so, the agency “would align more closely with its counterparts: S&P, Fitch, and DBRS, reflecting a perception of lower sovereign risk and an economy capable of absorbing shocks more effectively.”
Conversely, João Cruz, a market analyst at Xtb, noted that “a change in Portugal’s rating is not anticipated, which should remain at A3.”
The analyst emphasized that “the Portuguese economy continues to show resilience, with growth surpassing the eurozone average and keeping public accounts under control, supported by prudent budget management,” while public debt “is following a downward trajectory, nearing 95% of GDP, and the positive budget balance reinforces the perception of fiscal stability.”
“These factors, along with a context of employment and political stability, have bolstered growing confidence in debt markets, significantly reducing the likelihood of any downgrade,” he indicated.
Considering this scenario, Moody’s is expected “to maintain the current rating, understanding that the A3 grade already reflects much of the economic and financial progress, highlighting Portugal’s capacity to meet its credit obligations positively,” Silva anticipated.
Regarding the outlook, Filipe Silva believes it should remain stable/positive. “The Portuguese economy is expected to continue demonstrating resilience and growing at a healthy pace over the next two years, supported by PRR investments and the anticipated decrease in inflation and interest rates,” he noted.
Meanwhile, João Cruz believes that although there is room for a gradual revision of the outlook, “the most likely scenario is one of continuity, reflecting the balance between internal progress and external challenges.”
“Since May, Portugal’s economic situation hasn’t undergone significant changes, but future prospects continue to improve – according to the latest government statements in October – which foresees a primary surplus of 0.1%, maintaining the last revision at a total of 2.1% of GDP,” he noted. However, Moody’s “is expected to remain cautious, considering weak growth in the Eurozone, interest rates hovering around 2%, and an uncertain international context, which may hinder Portuguese economic growth.”
The ‘rating’ is an evaluation given by financial rating agencies, greatly impacting countries and companies’ financing as it assesses credit risk.
