DBRS keeps Portugal at ‘A’ high with positive outlook

Morningstar DBRS on Friday affirmed Portugal’s sovereign rating at A (high) with a positive outlook, a decision that matters for investors because it signals continued confidence in the country’s public finances and debt trajectory despite a difficult external backdrop.

The agency said Portugal’s debt-to-GDP ratio should keep falling and praised stronger-than-expected growth this year. It also said the country’s fiscal position is among the strongest in the euro zone, with revenue growth supported by the economy and labour market more than offsetting higher spending on public sector wages, social transfers and recent tax cuts.

DBRS said the main downside risk is a possible escalation or prolongation of the conflict in the Middle East, which could keep energy prices high and weaken global demand, confidence and financial conditions. Domestically, it warned that housing affordability problems could hurt competitiveness and limit growth over time.

The agency also said keeping budget surpluses will become harder without new measures as spending pressures rise from an ageing population and defence commitments. Based on the Portuguese government’s outlook, DBRS expects a balanced budget in 2026 and only a marginal surplus of 0.1% in 2027.

In a statement released after the decision, Finance Minister Joaquim Miranda Sarmento said the rating action reflects “the effort of families and companies” and shows Portugal is on a path of growth and lower indebtedness. This was DBRS’s third and final review of Portuguese sovereign debt this year.

Originally published at Eco.pt