Moody’s raises Portugal’s rating to ‘A3’

 In News, Ratings agencies, Sovereign debt

It was a move that had no been expected because of the current political instability and a slowdown in Portugal’s exports, but the US ratings agency Moody’s has increased Portugal’s rating to ‘A level’ — one level above Standard & Poor’s, and on the same level as Fitch and DBRS.

Moody’s increased the rating of Portugal’s sovereign debt by two categories to 7th investment category or four levels above ‘junk’ status and above the sovereign debt rating of Spain.
In a communiqué published on Friday night, Moody’s raised the rating from Baa2 to A3. Ratings awarded to countries are the result of an evaluation of a State’s capacity to meet its commitments with its creditors, so it means Portugal is not considered at risk of default on its sovereign debts.
Analysts in Portugal had generally predicted that Portugal’s rating from Moody’s would remain unaltered.
Standard & Poor’s, which will review Portugal again in March, has kept the country’s rating at BBB+.
In recent years, investors in the bonds market have been lending Portugal money at much lower interest rates than Spain.
Moody’s reason for the upgrade was because of the medium-term positive effects of a series of economic and budgetary reforms, a reduction in private sector debt and a progressively stronger banking system.
The agency also praises the recent evolution of Portugal’s public debt to GDP ratio that should fall to below 100% of GDP in 2024.
Nevertheless, the agency sees the current political crisis could have a negative effect on Portugal’s rating so that it cannot, for now, consider a further rating rise; at least for the next six months.