Desk Report: Fitch Ratings agency has kept Portugal's rating unchanged at 'A-', but has improved the outlook from stable to positive. 

The decision comes after the US financial rating agency did not change its assessment of Portuguese sovereign debt in March.

On 29 September last year, Fitch upgraded Portugal's rating from 'BBB+' to 'A-', maintaining a stable outlook. A year later, in a statement, it praised the continued progress in reducing the public debt ratio, the commitment to a prudent budgetary policy and the ongoing external deleveraging, which it believes reduces the country's vulnerabilities.

The agency predicts “a low risk of early elections next year”. However, it warns that the Government’s minority position “results in political uncertainty”, including “in relation to the approval of the State Budget for 2025 (OE2025)”.

Although it assumes a scenario in which the budget proposal is approved, it admits that it is possible that the Government will have to resort to management in twelfths, which “would require a more rigorous budgetary policy compared to the 2025 proposal”. For Fitch, this management “would also imply delays in the implementation of policies”.

The agency expects moderate economic growth and a “modest” budget surplus of 0.2% of GDP this year to reduce Portugal’s public debt to 95.8% of Gross Domestic Product (GDP) by the end of 2024, down from 99.1% at the end of 2023. For this year, Fitch estimates a “slight increase” in the unemployment rate to 6.6%, followed by a reduction to 6.4% between 2025 and 2026.

Inflation is expected to fall from 5.3% to 2.6% in 2024 and stabilise at around 2% over the next two years.

The next agency to look at Portuguese debt will be Moody’s on 15 November, closing this year’s assessments. The rating is assigned by financial rating agencies and has an impact on the cost of financing for countries and companies, as it assesses credit risk. Portugalnews.com.

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