DBRS releases its first review on the Portuguese debt rating in April

  • ECO News
  • 18 December 2018

The Canadian rating agency scheduled two reviews of the Portuguese rating, on the 5th April and 4th October. Currently, DBRS' rating of the Portuguese debt stands at BBB, with a stable outlook.

It has been 2 months since DBRS’ last rating of the Portuguese government debt — in October, the agency maintained the rating, referring to moderate risks detected in the country’s evaluation — and it has now scheduled the next review for the 5th of April, and a second review for the 4th of October.

According to European regulations, rating agencies must reveal beforehand on what days they will disclose their evaluation of the countries’ credit risk.

DBRS gained importance in our country as it was the only rating agency (of those considered reliable for the ECB) which allowed for the Portuguese debt rating to be above the “junk” level.

DBRS was the rating agency that allowed Portugal to continue being financed by the European Central Bank during the crisis since the three other most relevant agencies for the ECB had placed Portugal in the “junk” status. Moody’s, Standard & Poor’s and Fitch, had cut Portugal’s credit standing to junk during the starting in 2011, not considering that the Portuguese debt was speculative, that is, below investment grade, and not stable enough to be placed in the capital markets.

“The confirmation of the stable outlook reflects our belief that the country’s credit risks are overall balanced”, DBRS said in a statement published on the 12th of October, only a few days before the State Budget 2019 was presented to the Portuguese parliament.

At that moment the Canadian rating agency also published its estimates for the Portuguese economic growth, maintaining its expectation that the GDP would increase by 2.3% by the end of 2018. An extra note published on the 15th of October highlighted that the country’s faced mostly external risks, which were increasing and aggravated with the worsening of protectionism all throughout the world.

It alerted as well that the debt to GDP ratio, which was still quite high, was expected to decrease to 120% of GDP. That should still leave the country’s public finances quite vulnerable to negative shocks.