The European financial rating agency Scope maintained Portugal’s rating at A- on Friday and revised its outlook upwards, according to a statement released by the entity.
“Sustained debt reduction, prudent budgetary policy and an improvement in the external situation are the basis for the review of the outlook,” the organization said, with “the still high public debt and limited growth potential being constraints,” it indicated.
Thus, Scope “today maintained the long-term ratings of the issuer and the unsecured senior debt of the Portuguese Republic in local and foreign currency at A-, and revised the outlook to positive, from stable”.
Scope also maintained the issuer’s short-term ratings in S-1 in local currency and foreign currency, with stable outlooks, it added.
“The revision of Portugal’s long-term credit ratings to positive reflects the country’s sustained debt reduction, a strong track record of prudent fiscal policy with budget surpluses expected for 2024 and 2025, a robust sovereign debt profile and comparatively solid medium-term growth prospects, together with continued improvements in the external position,” Scope explained.
The agency anticipates, for 2024, “a moderation of the primary surplus to 2.5% of GDP, against 3.4% of GDP in 2023, and that Portugal will record a budget surplus of 0.4% of GDP”.
According to the entity, “in the long term, Portugal’s budgetary flexibility is expected to gradually decrease due to structurally higher social benefits, reflecting increased demand from an aging population” as well as “measures to mitigate social pressures related to high housing costs, as well as higher interest expenses, which are expected to increase from 1.9% of GDP in 2022 to 2.4% of GDP in 2025”.
Scope also considers that the risks to the continuity of policies in Portugal are “low”, indicating that this “stability is supported by a consensus on budgetary prudence among the main political parties”.
The agency estimates that the Portuguese economy will grow 1.9% in 2024 and accelerate to 2.2% in 2025, predicting that “growth will be driven mainly by exports and investments, with substantial EU funds providing additional support”.
As for the risks highlighted by Scope, the agency points to a high level of public debt, demographic pressures, due to the aging of the population and the size of the economy.
Source: www.jornaldenegocios.pt
