Fitch lowers Portugal’s perspective to ‘Stable’

  • ECO News
  • 20 April 2020

From "positive", Fitch's outlook for Portugal changed to "stable" with the agency anticipating an interruption in recent trends, both in the economy and in debt.

Fitch lowered the rating perspective from “positive” to a “stable” outlook, while affirming the Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at ‘BBB’. The US financial ratings agency is expecting to interrupt previous positive trends in both the economy and Portugal’s debt.

“The outlook revision reflects the significant impact of the global COVID-19 pandemic on the Portuguese economy and the sovereign’s fiscal position,” the agency said in a note published on its website. “The shock is likely to interrupt previous improving trends in economic growth, public debt-to-GDP, and resilience in the banking sector,” it adds.

Fitch expects that the containment will have a significant impact on GDP, taking into account the economy’s dependence on tourism, which has contributed 16.5% of the product and 18.6% of employment. The agency currently forecasts the economy will contract 3.9% in 2020, anticipating a sharp drop in the second quarter of this year, “before the gradual return of activity in the second half of 2020 and in 2021.”

The contraction expected by the US agency may, however, be more significant. “A second wave of infections, a longer lockdown period and/or worsening of the health crisis in other European countries, would see much larger declines in output in 2020 and potentially a weaker recovery in 2021.”