LISBON: The Portuguese economy received a double boost last week as ratings agency Moody’s raised its debt rating one notch to Ba2, hours after fellow agency Standard & Poor’s upgraded the country’s credit outlook.
The announcements provided a timely vote of confidence after Lisbon announced it will make a clean exit from its multi-billion-euro EU-IMF bailout package, following in the footsteps of Ireland by foregoing a credit line. Portugal’s Prime Minister Pedro Passos Coelho on Thursday said Lisbon would present its plans for the country’s financial future on May 17, the day it exits its three-year €78bn ($108bn) bailout programme.
Unlike Ireland, however, Portugal has already managed to return to debt markets before the end of its aid programme.
Moody’s, in raising Portugal’s debt rating said a further upgrade was possible as the country begins to pull away from its financial crisis. “Portugal’s fiscal situation has improved more rapidly than initially targeted and the public debt ratio will start declining this year,” Moody’s said.
A Ba2 rating leaves Portugal in junk bond territory, two notches below investment grade. Moody’s noted that the country’s fiscal deficit had been reduced by one percentage point more than expected last year, “indicating the government’s strong commitment to fiscal consolidation”.
Portugal has already managed to return to debt markets before the end of its aid programme.
Moody’s said Portugal will not likely need to lean on the European Stability Mechanism for more protective support after it exits its bailout programme.
“Portugal has regained access to the public debt markets and in addition the government has built up sizeable cash buffers.”
Its economic recovery “is gaining momentum, with signs of broadening beyond exports, which continue to perform strongly”.
Moody’s said it has the country now under review for another upgrade, adding that the government’s creditworthiness “can improve” in the short term.
AFP
