Fitch maintains Portugal's rating and improves outlook to 'positive'

The financial rating agency Fitch has maintained Portugal's debt rating at 'A', improving the outlook to positive, as announced today in a statement. Fitch indicated that the revision of the outlook reflects the agency's view that Portugal's public debt relative to GDP will continue to decline significantly over the forecast horizon (2026-2029), supported by prudent fiscal policy, with deficits remaining well below the median of peer groups. The agency still forecasts a deficit of 0.8% this year, noting that the deterioration mainly reflects expenses related to storms and reconstruction, a peak in expenses funded by the Recovery and Resilience Plan (PRR), and cuts in personal and corporate income taxes in the 2026 budget, alongside an increase in spending on salaries and pensions. Additionally, it noted that uncertainty regarding the scale of storm-related costs introduces an additional risk to the 2026 results. “We expect the deficit to decrease to 0.5% of GDP in 2027 as the temporary effects related to storms fade and PRR-funded expenses decrease,” it highlighted. Fitch also predicts that growth will slow to 1.8% in 2027 as PRR support diminishes. The agency estimates a budget surplus of around 0.4% of GDP in 2025. For Fitch, prudence in policies, budget performance “repeatedly exceeding expectations”, as well as “persistent current account surpluses have strengthened economic resilience and shock absorption capacity.” This is the third assessment of Portuguese sovereign debt this year. DBRS, in January, maintained Portugal's rating with a stable outlook, while S&P left the rating unchanged but improved the outlook from stable to positive.