Moody's and Fitch had already upgraded the outlook of the Portuguese debt, and all that was left was to know the decision of Standard & Poor's - which positively surprised analysts.
This Friday, the rating agency Standard & Poor’s was the first out of the three largest rating agencies to change their outlook on the Portuguese debt from a junk level (BB+) to BBB-, meaning they upgraded the Portuguese debt status to investment grade.
Even after Fitch and Moody’s upgraded the outlook of the Portuguese debt (although continuing to consider it “junk”), it was not expected that Standard & Poor’s would choose to change their opinion on the sovereign debt this soon. Six months ago, the agency had decided not to change the outlook given to the Portuguese debt, meaning they continued to grade the country’s debt at BB+ with a stable outlook. Therefore, five years after first grading the Portuguese debt as junk, this increase to BBB- with a stable outlook was unexpected.
This means that Standard & Poor’s now joins DBRS as the only other rating agency acknowledged by the European Commission which considers the Portuguese debt at the investment grade status.
According to Financial Times, S&P’s report states: “The stable outlook balances our expectation of solid economic growth and further budgetary consolidation, as well as receding external financing risks over the next two years, against the risks of a weakening external growth environment and vulnerabilities emanating from high, albeit falling, private-and public-sector debt”.
The Portuguese Finance ministry has already reacted to S&P’s decision stating that “the Government never doubted” that their effort would be acknowledged by rating agencies. In a press release sent to newsrooms, the Finance ministry considers that S&P’s decision “is based on the acknowledgement of a recent structural change in the financial sector, in the comprehensive economic growth, supported by a strong investment and exports dynamic, and in the control of expense and public debt”.