The Spanish financial rating agency Axesor today maintained Portugal’s unsolicited rating at ‘BBB +’, but lowered the outlook from “stable” to “negative” due to the expected impact of the pandemic on the economy and public debt.
In their half-yearly review of Portugal’s credit rating, Axesor Rating analysts foresee a contraction in the Portuguese economy that may exceed 9.4% at the end of 2020, with this fall accompanied by the deterioration of the labor market, with an estimated unemployment rate 11.6% at the end of the year (compared to 6.5% in 2019).
Pointing out the country’s high dependence on the services, tourism and international trade sectors, the Spanish agency points to Portugal’s “high level of public debt”, which may even exceed 136% at the end of 2020 “, and anticipates a” significant deterioration in Portuguese public finances, with the budget surplus of 0.2% in 2019 going to a deficit of over 7% in the current year.
Even so, the Spanish agency points out “a better situation in the face of previous crises, as a result of the important process of fiscal consolidation and the correction of the labor market observed in recent years”.
“We believe that the perspective of our credit rating in the Portuguese Republic could improve if the deterioration of the Gross Domestic Product (GDP) in the next semester is noticeably lower than expected, the recovery of the economy in 2021 happens at a much higher rate than estimated (6 , 3%) and public finances continue on the path of fiscal consolidation and debt reduction that has been happening until now “, he maintains.
In view of the impact of the health crisis, Axesor points to a 9% increase in spending, accompanied by a reduction in the order of 6.2% of revenues, mainly due to the reduction of this with taxes on production and imports, as a result of the pandemic .
Even so, the agency admits that this situation can be mitigated when aid from the European Reconstruction Fund arrives, forecasting a recovery in revenues in 2021, with a 6.4% increase.
The covid-19 pandemic has already claimed more than 531,000 deaths and infected more than 11.3 million people in 196 countries and territories, according to a report by the French agency AFP.
In Portugal, 1,614 people out of 43,897 confirmed as infected died, according to the most recent bulletin from the Directorate-General for Health.
The disease is transmitted by a new coronavirus detected in late December in Wuhan, a city in central China.
After Europe succeeded China as the center of the pandemic in February, the American continent is now the one with the most confirmed cases and the most deaths.
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