WASHINGTON (AWP/AFP) – Financial rating agency Fitch said Friday it has raised the outlook for Portugal’s debt from stable to positive, stressing that the impact of the pandemic was “less severe for most of its European peers.”
Fitch maintained its long-term debt rating at BBB.
“Although the debt ratio is high, it is on a downward trend,” Fitch said in a statement.
The report also notes that “a stronger-than-expected economic recovery and a certain degree of spending restraint in the government’s response to the pandemic has led to better fiscal outcomes compared to the eurozone average.”
Also referring to the scenario of stopping gas supplies from Russia to the EU, Fitch predicts that Portugal “will be relatively less affected than other EU countries by the direct impact of an ‘energy supply shock, given its low dependence on Russian energy'”.
The agency quoted Eurostat: Russia accounted for 4.9% of Portugal’s imported energy needs in 2020, less than the European Union average of 24.4%.
It admits, “However, the rise in global energy prices that would lead to such a scenario would place a significant burden on Portugal’s growth.”
Similarly, while direct economic exposure to Russia and Ukraine is “relatively limited,” “Portugal’s small and highly open economy is not immune to the spillover effects of the conflict.”
Of course, “disruptions in global supply chains, rising energy prices and increasing uncertainty about the economic prospects of major trading partners (such as Spain, Germany and France) all pose significant downside risks to Portugal,” Fitch concluded.
afp / rp