DBRS says Portugal is among least hit by higher debt costs

DBRS says Portugal is among the euro zone countries least exposed to rising sovereign borrowing costs, helped by stronger growth, debt dynamics and budget trends.

Portugal is among the euro zone countries least affected by the rise in sovereign borrowing costs, according to DBRS, a finding that matters for investors tracking the resilience of the bloc’s more indebted issuers as bond yields stay elevated.

The rating agency said Portugal, Greece and Spain are the least affected in its analysis because the negative impact of higher funding costs is largely offset by favourable debt dynamics backed by solid economic and fiscal performance. DBRS said sovereign bond yields have risen sharply worldwide in recent years, driven by higher public financing needs, quantitative tightening and larger risk premia.

In a scenario analysis covering nine major euro zone economies, DBRS assumed interest rates remain at current levels for the rest of the decade and that future funding costs match the average 10-year government bond yield seen in the first seven months of 2026. It said the effect on interest spending should be gradual because governments refinance only part of their debt each year.

DBRS projects that public sector interest expenditure between 2025 and 2030 will rise by 0.1 percentage points of GDP in both Spain and Portugal, while falling by 0.2 percentage points in Greece. That compares with increases of 0.9 percentage points in France and 0.6 percentage points in Belgium, highlighting what the agency called a much less pronounced shift for Portugal.

According to DBRS, the overall impact of higher financing costs depends not only on debt levels but also on economic and budget prospects. For Portugal, Spain and Greece, it expects strong growth and primary surpluses to keep reducing debt-to-GDP ratios between 2025 and 2030, limiting the amount of debt that will need to be refinanced at higher rates.

Originally published at Eco.pt