Standard & Poor’s places Portugal’s credit rating on “negative watch”

1 December 2010

New York, United States, 1 Dec – Financial credit rating agency Standard & Poor’s (S&P) Tuesday said it had placed Portugal’s long terms sovereign debt rating of “A-“ on negative watch.

S&P explained its decision by noting that the Portuguese government had made, “little progress on any growth-enhancing reforms to offset the fiscal drag from (…) scheduled 2011 budgetary cuts.”

“Policies the government has pursued have done little to boost labor flexibility and productivity,” S&P said, adding that as a result of structural rigidities of the Portuguese economy and volatile external conditions it expected that the Portuguese economy would contract by at least 2 percent in 2011.

A final decision about the rating change for Portugal is expected to be announced in the next three months.

Last April, S&P lowered Portugal’s sovereign debt rating from “A+” to “A-“.

Last Monday the European Commission forecast that Portugal’s economy would contract by 1 percent in 2011 followed by growth of 0.75 percent in 2012, which is out of line with projections for the Euro Zone as a whole, which is expected to see growth of 1.5 percent in 2011 and 1.8 percent in 2012.

Unemployment in Portugal is on the rise, with the European Commission’s Autumn projections forecasting rates of 11.1 percent and 11.2 percent for 2011 and 2012, respectively. (macauhub)