Fitch improves Portugal’s outlook. The country is closer to leaving the “junk” status

  • ECO News
  • 16 June 2017

As Mário Centeno anticipated, Fitch improved the Portuguese financial debt outlook to "positive". Yet, Portugal needs to wait at least until December to see an increase in its rating.

Fitch revised upwards its outlook for the Portuguese debt, moving it from “stable” to “positive”. The financial rating agency continues to see the Portuguese debt as speculative, but opens the door to the possibility of the country leaving the “junk” status in the next months.

According to Bloomberg, quoting Fitch’s report, Portugal’s deficit should decrease to 1.4% of GDP in 2018. Debt should shrink to 126% of GDP also in 2018. By 2026, this percentage should be reduced to 111%. This year, the rating agency says economic growth should reach 2%, decelerating to 1.6% in 2018.

“After the Council’s deliberation [that Portugal will leave the Excessive Deficit Procedure], Fitch’s decision comes in line with a set on indicators that confirm Portugal’s improvement trajectory“, stated Mário Centeno, Finance minister.

In spite of this positive sign to the markets, Portugal will have to wait at least until the end of 2018 to possibly see Fitch withdraw the “junk” status from the country’s sovereign debt. Fitch’s rating to Portugal continues to be BB+, the first “junk” level. Only on December 15 — the day Fitch will reassess Portugal’s rating –, could there be a change in the sovereign debt rating.

Currently, only DBRS places the Portuguese debt at an investment grade, giving Portugal a BBB (low) rating with a stable outlook. Moody’s is the next agency reviewing the Portuguese sovereign debt assessment, on September 1st.

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