Fitch maintains Portugal’s BBB+ rating

The ratings agency Fitch has maintained Portugal’s sovereign debt rating at BBB+ with a stable outlook.

It is the third ratings agency to keep Portugal’s rating unaltered this year. In a communiqué, the US agency emphasised that Portugal’s debt has “shrunk sharply in 2022” to 0.4% of GDP compared to the 2.9% of GDP in 2021, which was well above its forecast in October 2022.
It was an even better result than that from the Portuguese Government which had pointed to a negative balance of 1.9%. “The reduction in the deficit was driven by strong nominal growth in the economy, strong growth in revenues, and the lifting of Covid-19 support measures”, states the agency.
However, Fitch also estimates that the budget deficit will increase to 1.2% of GDP because of a reduction in taxes, an increase in budgetary expenditure and anti-inflation ´More Housing’ package. Nevertheless, the deficit is expected to reduce in 2024”.
The ratings agency also highlights that Portugal’s public debt had “fallen sharply” last year to 113.9% of GDP on the back of “strong nominal GDP growth” and forecasts a further reduction of public debt to 109.1% of GDP and 105.4% in 2024.
But despite this downward trend, Fitch stresses that Portugal’s GDP-debt ratio continues to be the “second highest in the ‘BBB’ rating category.
At the end of January, DBRS decided to maintain Portugal’s rating at A (low) with a ‘stable’ outlook, because of improvements in public finance indicators, although the agency warned of the effects and risks of a prolonged war in Ukraine.