The rating agency assesses Portugal based on its economic growth. Yet, the high level of debt limits this expansion, since it is one of the most expressive in the European Union.
Moody’s recognizes Portugal’s economic recovery. Yet, the rating agency says the Government’s high debt continues jeopardizing the efforts made concerning growth. This conclusion was disclosed by a new report, which is an update to the markets, and not a rating action.
“Portugal’s credit profile is supported by the economic recovery, its return to private capital markets, the economy’s diversification and relatively high average wealth levels”, stated Evan Wohlmann, Moody’s vice president and senior analyst. The rating agency expects Portugal will continue its economic recovery, “with an increase in GDP growth to 1.7% en 2017, before moderating to 1.4% in 2018”.
"Portugal’s credit profile is supported by the economic recovery, its return to private capital markets, the economy’s diversification and relatively high average wealth levels.”
Yet, there is an obstacle to this growth: the high level of debt. “Portugal’s key credit constraint relates to its very high government debt. Although we expect debt to start declining as a share of GDP this year, any debt reduction will only be gradual”, Moody’s alerts. Portugal’s debt to GDP ratio continues to be one of the highest of the European Union and one of the highest among countries with a Ba1 rating.
On May 5, 2017, the rating agency maintained Portugal’s Ba1 rating, considered junk, which remains the same since July, 2014. The outlook will remain stable, which shows the North-American agency does not predict any changes in the rating. The next assessment is scheduled for September 1st.