Portugal recovers grade "A" ratings after 12 years

The credit rating agency Fitch upgraded on Friday the risk rating for the Portuguese Republic’s debt risk to "A-", with a stable outlook, placing the country on the "A" (A-/A/A+) grading scale for the first time since 2011. 

In the reasoning for this decision, the agency notes the public debt and budget deficit reduction, the economy’s growth, and the financial system’s resilience, underlining the "Government’s firm commitment to consolidating public finance".

In reaction, the Minister of Finance claims: 

"Portugal has achieved the best risk rating for its public debt in 12 years. The successive positive assessments made by credit rating agencies vouch for the relevance of the Government’s debt reduction strategy, the aim of which is to uphold the economy. Recovering a position among the economies with the lower public debt risk means lower interest rates for the Portuguese households and companies. Containing financing risks is particularly significant in a context where the interest rates have gone up overall."

This is also the first time in 12 years that the two main credit rating agencies grade Portugal in the "A" rating scale, which includes the highest grades by rating agencies, representing a lower perception of the Portuguese public debt risk. 

Fitch’s decision follows on from an upgrade by Standard & Poor’s in September, paving the way for an upgrade to the agency’s "A" grade ratings. This came after the agency DBRS upgrading the Portuguese public debt to "A" in July.

Grade "A" (A-/A/A+) ratings mean the country has access to a greater number of international investors who invest debt funds from sovereign countries with greater quality risk standards. That leads to lower financing costs for the Republic and therefore, lower costs for taxpayers. 

Following the positive decisions taken in 2023, Portugal is considered a country that fosters public finance sustainability by curtailing budget deficits, improving tis public debt standing and a sustained economic growth path. This framework explains the economy’s greater resilience and, therefore, a drop in the sovereign credit risk.