DBRS upgrades Portugal to BBB Stable

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The Canadian ratings agency DBRS has upgraded Portugal to BBB Stable. The upgrade reflects DBRS’s assessment that Portugal’s outlook for public debt sustainability has improved.


The improvement in Portugal’s public finances has become more durable while its public debt ratio continues to fall to 125.7% in 2017 with public debt borrowing interest rates continuing to fall at a steady pace.    

Portugal’s budget position also continues to improve, supporting the reduction of public debt driven by strong tax revenues and contained public spending. The primary surplus reached a new high of 3% of GDP while projections indicate an average surplus between 2.5% and 3.8% over the next five years.

Other factors taken into consideration include a decline in high levels of corporate debt and non-performing loans, with corporate debt falling from a peak of 127% of GDP in 2012 to 104% in Q2 of 2017.

Portugal’s banking sector also continues to recover with banks, excluding Novo Banco (created out of failed bank Banco Espírito Santo) returning to profitability. The Portuguese economy also continues to grow and perform well supporting debt reduction with a strong and partly cyclical growth of 2.7% in 2017. Real GDP is forecast to grow to 2.3% in 2018. Growth has been driven by gross fixed investment and exports after a sharp fall in investment of 41% between 2008 and 2013. The investment boost was driven by a growth in tourism and infrastructure projects.

Labour market conditions have also continued to improve with the unemployment rate falling to 7.8% in February 2018. The large net external debt position is also gradually improving thanks to improved trade costs and non-cost competitiveness with the current account giving a small surplus, averaging 0.6% of GDP from 2013 to 2017, driven by tourism and a surplus in the services balance.