Portugal: Minister sees continued recovery, stabilitisation after DBRS upgrade

Portugal’s finance minister, Mário Centeno, has told Lusa that the trajectory of Portugal’s economic recovery and financial stabilisation will continue without interruption and that the country’s sovereign debt rating should soon be upgraded further.

“If we maintain the trajectory of consecutive positive assessments in the coming times, I would say that in a very short time Portugal could reach, not only with this, but in other rating agencies, that A rating” – that is, one of the highest, Centeno said in an interview on Friday.

Canadian rating agency DBRS on Friday announced that it had decided to upgrade Portugal’s rating to BBB+ from BBB (both investment grade), which means that the country is “at a level of achieving an A rating,” Centeno said.

According to the minister, who cited Spain as an example, it is possible to “anticipate a continuation of these improvements” because, although Portugal is still rated below Spain, it “today has interest rates [that are] lower or very close” to those of its neighbour, as well as having “debt falling as a percentage of [gross domestic product], which Spain at this moment does not have, a balanced budget and it is growing more than Spain.”

The minister said that the trajectory of economic recovery and financial stabilisation “will not be interrupted” and so “the good news that Portugal today is a very active subject in Europe will remain.”

On the DBRS decision, Centeno took the view that it was justified because of the “consolidation of public accounts, the reduction of public and private indebtedness, economic growth [that is] robust and above the European average and a positive [external] funding capacity of the Portuguese economy.”

Centeno highlighted the economy’s development, arguing that, “for the first time, Portugal is growing without jeopardising the external equilibrium” and thus is “better prepared to face external risks” that in the past “have so harmed the Portuguese economy”.

Among other leading rating agencies, Portugal has a BBB rating with both Fitch and Standard & Poor’s (second level of the investment category) and a Baa3 rating from Moody’s (first level in the investment category, a level above ‘junk’).

The outlook for all these ratings is positive, indicating that they could be upgraded.

A credit rating assesses the credit risk – the ability to pay the debt – of an issuer, which may be a country or a company. Each agency has its own scale, but for all the best ranking is triple A (AAA) and the letters C or D indicate assessments where the investment is considered risky or speculative – commonly known as junk.