Fitch raises Portugal’s sovereign rating to ‘A’

Fitch decided on Friday to raise Portugal’s rating from “A-” to “A”, with a stable outlook. Within 15 days, it is the second rating agency, after Standard & Poor’s (S&P), to raise the sovereign debt rating. Hours before the official announcement, Luís Montenegro had already anticipated that he expected an upward revision of the country’s rating in the coming ‘hours’. ‘Portugal is now an example in Europe from a financial point of view,’ said the Prime Minister during his official visit to Japan.

In March, the agency had kept Portugal’s rating unchanged at “A-”, with a positive outlook, which left room for improvement in the country’s rating. Fitch justified its decision – on the night it downgraded France’s rating from “AA-” to “A+” – with the continued reduction of Portuguese debt. By 2027, the agency projects a fall in the debt ratio to 88.4% of GDP, supported by ‘significant primary surpluses’ and a ‘prudent fiscal policy’ that already has a ‘solid track record’.

For this year, Fitch estimates a budget surplus of 0.1% of GDP, with tax cuts and borrowing costs under the Recovery and Resilience Plan (PRR) being offset by resilient consumption and tax revenues. However, from 2026 onwards, ‘small budget deficits’ will return, i.e. 0.7% of GDP next year and 0.4% in 2027.

In a global environment of geopolitical uncertainty and trade tensions, the agency says there are ‘risks’ but anticipates Portuguese economic growth above the eurozone average (1.1%) over the next two years. Thus, for this year, it estimates GDP growth of 1.8%, which should accelerate to 2.2% in 2026 and slow to 1.7% in 2027, as public investment, via the PRR, normalises.

With a ‘robust’ labour market, the unemployment rate is expected to hover around 6.2% until 2027, not least because it will be difficult to fall further given the ‘shortage of skills’. Inflation is expected to stabilise at around 2% during this period.

Portugal’s external position has also improved, driven by a ‘strong increase in exports of services, particularly tourism, and a reduction in the energy deficit’ through the greater weight of renewable energy.

In a statement sent to newsrooms, the Ministry of Finance indicates that the ‘decision is another achievement for Portugal and recognition of the work being done by the Government, families and businesses to promote economic growth, ensure balanced public accounts and a sustained reduction in public debt’.

In January, DBRS was the first agency of the year to assess Portugal, raising the country’s rating. In July, in the second round of assessments, the Canadian agency chose not to change the sovereign debt rating. In May, Moody’s decided not to change Portugal’s “A3” rating, with a stable outlook.

On 29 August, Standard & Poor’s (S&P) decided to raise Portugal’s rating to A+ for the second time this year, with a stable outlook. On 28 February, it had already revised its sovereign debt rating from “A-” to “A”, with a positive outlook.

And in May, Moody’s decided not to change Portugal’s “A3” rating, with a stable outlook. The next and final assessment of the Portuguese rating is scheduled for 14 November, by Moody’s.