New disappointment in the ratings: Fitch maintains Portugal at the “garbage” – publico

                 

                         
                     

                 

 
                         

The reduced confidence in achieving the goals of the deficit by the Government and especially the downward revision of economic growth potential made the international rating agency Fitch to maintain the rating Portuguese BB +, ie at a level that is still classified as “junk”.

                     

                          There was the expectation that Fitch became this Friday in the first of the three largest branch rating International to Portugal to return to the level “investment”, which is achieved from a BBB- rating, leaving the level “waste” in the country fell during the sovereign debt crisis.

There were some grounds for optimism. After all, Fitch had placed for a year now the rating Portuguese from a perspective “positive”, the way that agencies have to announce that an increase in the rating over the coming months is possible.

However, the “positive” perspective has not become this time a rise of rating . In a statement published this Friday night, Fitch explains why.

First, the agency says that “the objectives of the Government to reduce the budget deficit are at risk.” Do not believe that Portugal can confirm this year’s deficit of 2.7% promised by the Executive, or even that this is below 3%, placing the country out of the excessive deficit procedure. The forecast of Fitch is a deficit of 3.1%, the which is considered more serious because it is the result of “a break in the consolidation of the structural deficit,” that is, the real effort by the government to balance the public accounts.

Then, the agency notes that “progress the rebalancing of the economy has been slower than expected when the outlook was revised to ‘positive’ in April 2014 “. While recognizing that structural reforms have been made in areas such as labor market, Fitch says that the growth of the economy still will be very limited by the high level of private sector debt and low levels of competitiveness.

That’s why, despite predict a GDP growth of 1.5% during this year, the agency now reduced its estimate for the potential growth of the Portuguese economy from 1.5% to 1.25%. One reason behind this increased pessimism is that “the investment is maintained too low to sustain the stock of capital”, a warning that was also made recently by the IMF in the aftermath of his last mission in Portugal

These two factors -. deficit possibly above the forecasts of the Government and lower growth potential – make that Fitch is less optimistic about the trajectory of the Portuguese public debt, which sees only beginning to reduce -If this year and only by reducing the deposits accumulated in the meantime by the Treasury.

The evolution of public debt share in GDP is critical for agency rating , since the purpose of these to give a rating to a State is to indicate the real capacity of this to pay off your debt in the future.

The good news in this report from Fitch is that, in addition to maintaining the rating , the agency also maintained the “positive” perspective. That is, the promise of a possible rise of the note in the coming months is still present.

Compliance with the deficit target in 2014, confirming an easier and cheaper access to finance in the markets and the that “no anti-euro party or populist have attracted significant support in the polls” are the reasons given by the agency to continue to put the improvement hypothesis rating Portuguese.