DBRS increases Portugal’s rating, while Moody’s postpones assessment

The Canadian rating agency DBRS increased Portugal’s rating to BBB with a stable outlook. The agency decided to increase Portugal’s rating by one step, meaning it now stands in the investment category, because the country improved the perspectives on debt sustainability. Moody’s, on the other hand, is keeping Portugal in the junk status until October 12, when it will make a second assessment on the country’s rating. The agency decided not to make any decisions about the two countries it was supposed to assess on April 20: Portugal and Bahrain.

“The improvement in Portugal’s public finances has become more durable, which is supporting the emerging downward trajectory in the public debt ratio”, DBRS states, in the press release announcing its decision. The agency highlights that after public debt stabilized at 130% in 2014 and 2016, it ended up decreasing to 125.7% in 2017, and that it “is projected to continue declining”, DBRS states. The Portuguese Executive foresees a 122.2% debt for 2018 in the Stability Programme. Even so, the agency highlights the “high level of public debt remains one of Portugal’s major rating challenges”, because it “leaves public finances vulnerable to negative shocks, particularly a materialization of contingent liabilities and an adverse growth shock”.