S&P kept Portugal's rating at "BBB", with a "stable" outlook. This projection is based on the assumption that lockdown will end, and vaccination will run smoothly.
Standard & Poor’s kept Portugal’s rating at “BBB”, with a “stable” outlook, but has updated its projections for the country, revising growth estimates downwards. However, even with lockdown, the credit rating agency points to the country’s GDP growing by 4.8% in 2021. It sees potential for this cycle to continue in the coming years with the millions from the European bazooka.
“We project Portuguese GDP to recover 4.8% this year, despite a weak start in this first quarter given that the country remains in lockdown” because of the new coronavirus pandemic, S&P says in a press release to which ECO had access. For the deficit, it points to a 4.7% reduction in 2021.
This projection is based on the assumption that lockdown will end, and vaccination will run smoothly. “Assuming an increase in vaccination over the next three months, the government’s target of inoculating 70% of the population by the end of August seems achievable.”
“However, group immunity is unlikely to be achieved before the peak tourism season,” the credit rating agency warns. “We assume that social distancing will remain key in 2022. This puts at risk the recovery of Portugal’s tourism and travel sector, which employs almost 19% of the Portuguese workforce, accounts for around 16% of GDP and 6% of net exports.”
Despite this wake-up call, S&P is relatively optimistic about the country after 2021, anticipating that “the Portuguese economy will grow, in real terms, at an average of almost 4%, as the economy is expected to receive around 4.3% of GDP per year in EU grants, both from the European budget and Next Generation.”