US ratings agency Standard and Poor’s (S&P) – described by Portuguese Observador website as the “most influential in the world” – has for the first time since the start of the crisis upped Portugal’s credit rating.
As national media explains, we are now just one step away from exiting the rubbish category – but much more important is the message S&P is giving, weeks away from a crucial general election.
In a statement released on Friday, the agency stressed the importance of any future government continuing with structural reforms.
“In our opinion, if structural reforms do not continue within the areas of the labour market and productivity this could penalise the activity of future investment in Portugal and the Portuguese economy, which would be negative for growth”, said the statement.
Observador explained the connotations of Portugal’s rating passing from BB to BB+ – a level it describes as “the least negative” in S&P’s classification of speculative debt.
“This means that despite the improvement of the rating, S&P are continuing to recommend Portuguese debt only to investors that assume the highest risks in their portfolios, as opposed to those who are more conservative, like pension funds which tend to limit themselves to so-called ‘quality investments’, explained the site.
“For Portugal’s rating to leave the speculative category (commonly dubbed ‘rubbish’) and advance to quality, it needs to advance to a new level, BBB-, at which point the rating would have what is called a ‘stable perspective’.”
Finance Ministry welcomes news
Finance minister Maria Luís Albuquerque has welcome S&P’s news, particularly as it comes as the coalition government is going all-out to persuade the electorate that the country is on the right path. Talking in Setúbal yesterday, she said: “What I read in these words is that there cannot be a deviation after the elections of policies or measures without running the risk of another drop in the rating”.S&P’s decision is “good news”, she added, “which recognises the results already achieved”.
S&P’s statement shows that Portugal’s rating stands to be increased even further as long as there is continuation of “reforms, growth and consolidation of public accounts”.