S&P revises outlook on Portugal to stable

Standard & Poor’s rating agency has revised its outlook on Portugal from negative to stable, in spite of the country having the fourth largest net external debt figure of the 129 sovereign countries rated by the organisation.

In a statement S&P noted the upgrade to its outlook reflects the fact the economy and labour market “are recovering faster than we projected, with better-than-expected budgetary performance”.

It added that although the net external debt of the country is estimated at 317 per cent of current account receipts for 2014, the use of the European Financial Stability Facility (EFSF) and European Stability Mechanism (ESM) has helped improve the government’s financing profile.

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“In our view, the official financing has also prompted commercial creditors to increase their exposure to Portuguese government debt, facilitating Portugal’s “clean exit” from the EU/IMF program.”

S&P stated it expected Portugal’s real GDP will likely grow an average of 1.4 per cent a year during 2014-2015, mainly driven by sustained export growth. However, it noted that the economy’s external vulnerabilities persist given Portugal’s large external debt.