Global rating agency Fitch affirmed Portugal at BBB+ with a stable outlook on Friday, forecasting high levels of government debt and low medium-term growth potential.
“The Stable Outlook reflects our belief that following this year’s sharp rise, general government debt will resume a downward trajectory over time, based in part on Portugal’s pre-COVID-19 track record of prudent fiscal policy,” Fitch said in a statement.
The rating agency expects the Portuguese economy to contract by 8.8% in 2020, before a mild economic recovery of 4.8% in 2021 and 2.4% in 2022.
Fitch said that Portugal’s small and open economy, which strongly depends on tourism, meant it was vulnerable to downside risks to the global travel industry and key trading partners.
Also, the government’s recently imposed restrictions, including a curfew over the weekend after 1 pm, is “uncertain, and depends on the evolution of the pandemic” according to the agency.