S&P ups Portugal’s rating to ‘A’ with positive outlook

The US ratings agency Standard & Poor’s raised Portugal’s rating on Friday from A- to A with a positive outlook and could put the rating up again over the next two years.

In a press release S&P stated that it had decided to raise the country’s rating on its public debt because Portugal was on track to achieve modest budget surpluses between 2025 and 2028, thereby reducing its overall sovereign debt, and doing so more quickly than the majority of other European countries.

The agency estimates that the budget surplus had been 0.5% of GDP in 2024 and forecasts 0.2% to 2026-7.

It also anticipates that Portugal’s sovereign debt should fall to 84% of GDP in 2028 compared to 96% in 2024.

Against a backdrop of an uncertain geopolitical landscape, S&P also believes that Portugal has managed to reduce its risk from external shocks and even with the threatened tariffs from the United States, “Portugal should post modest surpluses on its current account”.

In a trade war scenario, the main risk to the Portuguese economy would be “secondary, through ties with the most affected economies, such as Germany”. On the pressure to increase military spending, on the other hand, S&P has no concerns, and states that it remains confident in Portugal’s policy to maintain a downward trajectory on public debt and overseas deleveraging.”

S&P predicts Portugal’s GDP will increase real GDP growth to around 2% between 2025 and 2028, above the 1.2% increase in the Euro Zone average GDP growth, partly on the back of Portugal’s faster execution of its Recovery and Resilience Programme.