Fitch keeps Portugal’s rating unchanged
The US ratings agency Fitch decided on Friday not to change Portugal’s rating which remains at ‘A’ , with a positive outlook despite the recent government crisis resulting in the dissolution of parliament and the calling of snap elections.
The agency’s decision, the first to assess the country’s sovereign debt after the fall of the government, expects the Portuguese economy to show resilience “despite high external risks and uncertainty related to political developments.” Still, Fitch emphasises that it foresees a “continued reduction” of public debt and external debt.
Fitch projects growth of 2.2% for Portugal in 2026, in line with average ‘A’ forecasts (2.4%) and exceeding eurozone growth rates (1.3%). However, it refers to the existence of risks to growth, both externally and internally.
Internally, the agency highlights the instability related to elections that could slow the execution of the Recovery and Resilience Plan (RRP), which could “delay critical projects”, with negative consequences for growth. “In addition, it could weaken consumer and business confidence, leading households and companies to adopt more cautious spending and investment strategies,” it says.
As to the rejection of the confidence motion in the government that led to the decision to hold snap elections scheduled for May 18, the ratings agency points out that this is the third general election in Portugal in three years, which “stresses recurring political volatility”. Fitch further predicts that a centrist party (centre-right PSD or centre-left PS) will win the elections and maintain “prudent fiscal policies.”
“However, despite the country’s good track record of budgetary discipline over several government changes, the upcoming election period could affect the implementation of measures, potentially undermining Portugal’s budgetary position,” it warns.
At the external level, the rating agency highlights the challenges arising from the “growing trade tensions” between the European Union and the US, as well as geopolitical issues, which “may harm exports and reduce growth”.
Canada’s DBRS was the first ratings agency of the year to evaluate Portugal, raising the country’s rating to A (high), with a stable outlook, on January 17. Followed by S&P on February 28 which gave an upward revision of Portugal’s sovereign debt from A- to A with a positive outlook. Moody’s will give its evaluation on Portugal on May 16.
