Standard & Poor's Upgrades Portugal's Sovereign Rating to 'A+' with Stable Outlook
The American credit rating agency Standard & Poor's (S&P) announced on Friday its decision to raise Portugal's sovereign rating to 'A+' from 'A', assigning a 'stable' outlook. This marks the second upgrade by the agency this year, after having elevated the rating to 'A' with a positive outlook on February 28, which had already signaled the potential for a further positive revision. The upgrade reflects growing confidence in the nation's economic and fiscal management.
In its official statement, S&P expressed its belief that the Portuguese Government will manage a 'relatively smooth implementation of policies, oriented for a prudential budget despite the fragmented Parliament.' The agency projects a continued 'downward trajectory' for public debt, forecasting a reduction to 84% of Gross Domestic Product (GDP) by 2028. This outlook is maintained even while acknowledging future spending pressures related to defense and social programs. For the current year, S&P forecasts a budget surplus of 0.2% of GDP, though it anticipates a return to deficits by 2026 as capital investments linked to the Recovery and Resilience Plan (PRR) accelerate.
The Ministry of Finance, under the leadership of Joaquim Miranda Sarmento, reacted positively to the announcement, declaring the decision 'a victory for Portugal and for the path taken by the country, its families, and companies in recent years.' The ministry's communiqué emphasized that Portugal's rating now stands above that of other major European economies like Spain and Italy. 'There are only nine countries in the Eurozone that continue with a notation superior to Portugal's,' the ministry stated, reinforcing the government's commitment to pursuing 'a path of reformism and change, that potentiates economic growth, but always with budgetary responsibility and a progressive reduction of debt.'
S&P's report also provided an economic forecast, estimating a slowdown in GDP growth to 1.7% in the current year from 1.9% in 2024, but projecting a recovery to 2.2% in 2026, supported by PRR investments. The agency noted that Portugal appears 'protected from the direct effects' of a trade dispute between the US and the EU, as only 7% of its goods exports are destined for the United States. It suggests the 'strong performance of the tourism sector' will help compensate for any negative tariff impacts on sectors like textiles and automotive components.
With the State Budget for 2026 set to be presented in just over a month, S&P considers that the Government 'can count on the abstention' of the Socialist Party (PS) for its approval, given that a pact with the Chega party has been ruled out. The agency also noted that, should the budget fail to pass, the application of a duodecimal system would still allow for the maintenance of fiscal discipline. This upgrade follows a series of evaluations from other agencies this year, including an upgrade from DBRS in January and stable ratings from Fitch and Moody's. The next scheduled rating evaluation for Portugal will be conducted by Fitch on September 12. Navigate Portuguese property regulations with expert guidance at realestate-lisbon.com.
