Portugal’s high levels of public debt prevent improved credit rating

1 April 2015

Portuguese public debt remaining at over 100 percent of GDP until at least 2020 is a factor impeding the improvement of the country’s credit rating, credit rating agency Moody’s said Tuesday.

“We anticipate that the ratio of debt to gross domestic product (GDP) will remain very high in the coming years and is unlikely to fall below the barrier of 100% of GDP by the end of the decade,” said the analysts from Moody’s in a report on Portugal.

The rating agency said the high debt ratio, which in 2014 reached 130.2 percent of GDP, along with moderate prospects for economic growth, is the “key factor” in limiting the credit rating assigned to Portugal.

“The Portuguese government debt ratio is one of the largest and although we hope it will start to decrease from this year, the estimates for the debt to GDP ratio are extremely vulnerable to potential shocks,” such as lower economic growth or a slower than expected path to fiscal consolidation, Moody’s said.

The agency expects public debt will begin to fall this year, up to 125 percent of GDP at the end of 2016, after reaching a peak of 130.2 percent of GDP in 2014.

Moody’s rates Portuguese debt at “Ba1” (one level below investment quality) with a stable outlook. (macauhub/PT)