Portugal's rating rises despite overall debt level

Rating agency Dominion Bond Rating Service (DBRS) today raised its outlook on Portuguese government debt in a welcome move that sees it join the other three key agencies in a positive assessment for the country.

The Canadian agency raised its outlook from negative to stable, keeping it at BBB, indicating that the agency now has a more favorable opinion of government debt and may encourage a rise in the rankings by one or more of the other agencies.

The DBRS rating for Portugal now classifies government debt at ‘investment’ level in a recommendation that institutional buyers will note.

Fitch, Moody's and S&P still rate Portuguese government debt as 'speculative' i.e. BB+, Ba2 and BB respectively.

These ratings reflect Government forecasts that the ratio of government debt to Gross Domestic Product in 2014 should reach 130.2% but a hoped for decline to 128.7% is predicted during 2015, falling to 116.7% by the end of 2018.

On May 9th, Moody's raised its rating for Portugal for the first time since 1998 but the rating is still nine levels below that recorded before the start of the crisis.

Moody's said that Portugal’s budgetary position had "improved more rapidly than originally anticipated," and that Portugal made it out of the bailout programme without resorting to a precautionary credit line, proving that the country can have full access to international funding on the open market.

Many politicians denigrate these ratings agencies when things go badly, but welcome them when the ratings rise. The primary impact of a rise in the country’s rating is the encouragement it gives international funds to buy Portuguese debt at sensible interest rates.

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