DBRS maintains Portugal’s rating
The ratings agency DBRS is likely to maintain its stable rating outlook for Portugal but has also issued a warning about the country’s rising debt which stands at 130% of GDP.
The Canadian ratings agency has awarded Portugal a ‘BBB High’ rating which is stable, but says the effects of the pandemic have placed a financial strain on borrowing which has not gone unnoticed.
DBRS has maintained a conservatively positive outlook on the quality of Portuguese debt, and gave the seal of approval on government bonds which were purchased by the European Central Bank in the post-troika period.
DBRS continues to be the agency which attributes the highest rating to Portugal’s national debt out of the other ratings agencies that evaluate it, such as Moody’s and Standard & Poor’s.
And despite the pandemic, which has caused a severe recession in Portugal, DBRS has maintained the rating it awarded after its last evaluation in September and will likely do the same again.
“We are not expecting them make any change in the rating,” says Filipe Silva, director of investments at Banco Carregosa.
“”The rating and outlook should remain unchanged,” says Filipe Garcia from the IMF.
However, warnings have been issued. “It is possible that DBRS will issue reservations on Portugal’s economic outlook,” says the Banco Carregosa specialist.
“The increase in debt, as well as a deterioration in economic conditions had already been factored in during the last analysis made by this ratings agency,” but this “new lockdown has made a situation already complicated, worse,”adds Garcia.
“There may be words of caution regarding the increase in debt/GDP ratio which is now around 130%, but also in “a future increase in internet rates in the secondary market. After closing the year with below zero interest rates, the yield on Portuguese treasury bonds has risen, now standing at 0.391%on 10-year bonds.
It is a slight increase that is in common with other Euro Zone countries, but is particularly visible in the interest rates on US debt over investor fears of inflation.
The Portuguese State is expected to add an extra €20Bn onto Government debt as a result of the Covid-19 pandemic.