Rating of Portugal remains at 'A3' by Moody's
Moody's Stamps Portugal with a "Stable" Outlook
Moody's Ratings, a well-known credit rating agency, has recently wrapped up a review of Portugal's credit standings. They've made it crystal clear, though no action regarding ratings is on the horizon at the moment, stating, "This publication does not announce a rating action."
The Account
Portugal's economic profile, marked by a competitive and diverse economy, high wealth levels, and robust institutional strength, shines bright in Moody's appraisal. However, a public debt ratio that hovers above most countries of similar standing, poses some challenges.
Elections on the Horizon
The forthcoming legislative elections are on Moody's radar, as they express that an increase in political uncertainty post-elections will unlikely derail Portugal's economic and fiscal trajectory.
Growth Projections
Moody's predicts a real GDP growth of 2.2% in 2025 and 1.9% in 2026. However, they caution that US tariffs could cast a shadow over their forecast. Conversely, they anticipate robust economic growth and budget surpluses between 2025 and 2026.
The 'Stable' Outlook
The "stable" outlook reflects a delicate balance of risks. On one hand, positive economic and fiscal trends make their way forward, while on the other, hurdles like below-expected external demand due to "parliamentary fragmentation" and climate risks, present significant challenges.
Exposure to Climate Risks
Portugal's vulnerable to climate hazards, which could have an adverse impact on fiscal metrics beyond expectations.
Higher Growth Aided by Reforms
Moody's points to the potential for higher growth if the implementation of investment projects and macroeconomic reforms linked to the national Recovery and Resilience Plan (PRR) are executed more effectively.
Scope Keeps Portugal's Grade at "A"
Joining Moody's, Scope Ratings has chosen to keep Portugal's rating at "A". They attribute their decision to Portugal's substantial reduction in public debt, a history of prudent fiscal policy, and improvements in economic resilience.
Back in November, Scope elevated Portugal's long-term rating to "A" and slapped a "stable" outlook on it. This year, DBRS and S&P enhanced their sovereign debt classification, while Fitch maintained Portugal's rating at 'A-'.
The Implications of a Rating
The "rating" is an assessment attributed by credit rating agencies, carrying significant weight in the financing of countries and corporations, since it assesses credit risk.
[Breaking News updated at 11:47 PM]
Insights
- In 2025, Scope Ratings assigns Portugal a long-term local- and foreign-currency issuer and senior unsecured debt rating of A with a Stable outlook. Moody's rating for Portugal is not explicitly provided.
- Key factors supporting Portugal's credit rating in 2022 and beyond include: substantial reduction in public debt, improvements in domestic economic resilience and external position, and a favorable public debt profile.
- Challenges to Portugal's credit rating involve an elevated but declining stock of public debt, moderate growth potential constrained by structural factors, and vulnerability to external shocks due to Portugal's open economic structure.
The crisis looming over Portugal's finance sector, stemming from a high public debt ratio and vulnerability to external shocks, remains a concern, despite the "stable" outlook given by Moody's Ratings. The business environment, however, benefits from a competitive and diverse economy, robust institutions, and potential for higher growth through effective implementation of investment projects and reforms.
