Ratings agency DBRS has kept Portugal's credit category in the 'junk' category, saying that there have been improvements but these need to be long term and sustainable indicators before the Canadian agency will change its opinion.
The company's analyst, Nichola James, told Lusa today that the agency recognises Portugal's progress but is sticking with the current rating of BBB until the Government is seen to have committed itself to European budgetary rules and has resolved persisting vulnerabilities in the banking sector - notably Novo Banco and Caixa Geral.
Recognising that "there was an improvement last year," and anticipating that the public debt to GDP ratio "will begin to fall this year," James believes that "this is not enough" to change the current rating.
As for economic growth, DBRS says that the expectation that the Portuguese economy will grow at a rate of 2% a year from 2021 onwards is "optimistic."
"Just looking at the structural effort that has been made so far, it is encouraging, but we feel that much more needs to be done to improve growth potential. To achieve growth of around 2% a year, more structural changes are needed - that's the problem," said James.
Referring to spending cuts made by Mário Centeno's finance ministry in 2016 to ensure a positive budget, Nichola James says that the DBRS "realises that the government can do this," but that the agency "would have preferred more progress in improve the efficiency of expenditure."
In 2016, Portugal closed the year with a budget deficit of 2% of GDP and a debt of 130.4%. By 2017, the Government expects to reduce the deficit to 1.5% and debt to 127.9%.
These two key financial indicators are expected to improve gradually, with a positive budget balance of 1.3% in 2021 and a debt of 109.4% in the same year, according to the latest projections by the Tax Authority.
Comments
Because this is the banana republic of Portugal.