Lisbon, Sept. 8, 2025 (Lusa) - Portugal's rating was at a level known as “junk,” but after around eight years, it is now close to the highest levels in the main ratings agencies, following debt reduction and public account balancing.
Portugal's sovereign debt rating was among the lowest levels for several years after the crisis that removed investor and market confidence.
In recent years, the governments of António Costa and then Luís Montenegro have set themselves the goal of reducing public debt and achieving positive budget balances or as close to them as possible, which has improved Portugal's image in the eyes of investors.
Portugal's rating has accompanied this change in the management of public accounts, and now DBRS rates the sovereign debt at A (high) and Moody's at A3, while Fitch currently rates it at A-, but with a review scheduled for this Friday, 12 September S&P, meanwhile, was the last agency to assess the rating, on August 29, and upgraded the rating from “A” to “A+”, just six months after another hike, contrary to the expectations of analysts heard by Lusa.
"Despite a highly uncertain commercial and geopolitical environment, Portugal is expected to record moderate surpluses and will continue to improve its external financial metrics, characterised by a significant deleveraging of the economy," the financial rating agency said in its justification for the decision.
In a statement sent out after S&P's decision to raise Portugal's rating was announced, the Ministry of Finance emphasised that the rating agency "is clear in stating that the improvement in the rating is the result of the prudent and solid budgetary policy that Portugal has followed, aligning itself with the government on the prospect of a budget surplus this year".
The government also pointed out that, at the moment, in S&P's rating, there are only nine countries in the eurozone with a higher rating than Portugal (Germany, Luxembourg, the Netherlands, Austria, Finland, France, Ireland, Belgium and Slovenia). In comparison, "countries like Spain and Italy currently have a lower rating".
In an analysis, BPI Research emphasises that "the expectation of continued consolidation of public finances was one of the reasons for the upgrade by S&P", and that the revision was based on "the improvement in Portugal's external position (even in a context of high uncertainty arising from US tariffs) and the commitment to consolidating public accounts, even in a context of persistent fragmentation in the Portuguese parliament".
"S&P also notes that the public debt ratio is expected to continue to decline in the coming years, reaching 84% of GDP by 2028," it reads.
Portugal's rating is thus currently close to the highest levels, around eight years after it left the “junk” level.
Each rating agency has its own scale, but in all of them, the best rating is triple A (AAA), and the letters C or D indicate ratings in which the investment is considered risky or speculative (commonly known as “junk”).
It was in September 2017 that the financial rating agency Standard and Poor's (S&P) took Portugal out of “junk”, revising upwards the rating assigned to Portuguese sovereign debt from “BB+” to “BBB-”, a first level of investment.
In December of the same year, Fitch took Portugal out of the “junk” category, upgrading the rating given to Portuguese public debt by two notches, from “BB+” to “BBB”, the second level of the investment category.
Moody's only removed the country from junk status in October 2018, raising Portugal's rating to Baa3.
In 2017, the public debt ratio stood at 126% of Gross Domestic Product (GDP), where it began a downward trajectory that was only interrupted by the pandemic in 2020, but then resumed.
Public accounts were already in the red, with Portugal recording a budget deficit of 3% of GDP in 2017.
Currently, according to the most recent data available, public debt stood at 96.3% of GDP in the first quarter of the year, and the budget surplus was 0.2% in that period.
A rating is a classification given by financial rating agencies that assesses the credit risk (ability to repay debt) of an issuer, which can be a country or a company.
MES/ADB // ADB.
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