Fitch approves Portuguese Budget, highlighting “fiscal progress”

  • ECO News
  • 22 October 2018

Fitch Ratings reported that some commitments in this year's budget are a reflection of the approach to elections, noting that the "fiscal tightening" has promoted a consolidation of public finances.

Fitch doesn’t seem to think that the Portuguese state budget was too much campaign-oriented, as it had “noted the possibility of fiscal loosening in the run-up to the general election, due by October 2019”, yet the budget presented for 2019 has given no signs to the rating agency that this factor would end up triggering any reversals in the “minority Socialist government’s fiscal stance”.

“Portugal’s 2019 budget plan maintains the strong commitment to fiscal consolidation that has supported the country’s sovereign credit profile”, Fitch’s press release shows.

The agency has considered that there are enough reasons to approve Portugal’s state budget for 2019, which was presented last Monday, and it expects that “revenues should benefit from stronger tax collections and a reduction in tax evasion”, as planned by the government, alongside the reduction of the deficit to a near-nil value, standing at 0.2% of GDP for 2019, in contrast with this year’s 0.7% of GDP goal.

“These targets are consistent with recent macroeconomic and fiscal developments supporting our view that gross general government debt is on a firm downward trend”, Fitch highlighted. Last December, the rating agency surprised the markets by announcing it would improve Portugal’s rating by two levels, to BBB (which is a quality investment level).

In June, the agency re-confirmed the rating, but it gave a special warning to the country, regarding the possibility that new unbalances could resurge in terms of public finances due to the proximity to elections.