A Rating is an evaluation given by financial rating agencies, which has a significant impact on a country's and companies' financing. It assesses the credit risk associated with investing in these countries and their businesses.

Several agencies, including DBRS, Creditreform, and four other major agencies, have assigned Portugal a rating of A-. Furthermore, there's good news on the horizon, with announcements anticipating further improvements in the coming months, as indicated by agencies like S&P.

This shift in Portugal's evaluation as an investment destination is largely attributed to the remarkable improvement in budgetary outcomes and public debt management, even in the face of external challenges such as global crises and inflation. It is worth highlighting that Portuguese public finances have benefited from robust economic growth, a consistent increase in tax revenues, and a reduction in government spending.

In the past year, the deficit dropped to a mere 0.4% of the Gross Domestic Product (GDP) in 2022, and there is an expectation that Portugal will achieve budgetary balance or even a surplus later this year.

The key drivers behind this positive new assessment of Portugal and its inclusion in the league of countries with an A Rating are tied to the impressive economic growth demonstrated even after the challenges posed by the pandemic. Portuguese tourism has maintained its appeal to new markets, and notably, the Portuguese economy has shown resilience in the face of energy crises that affected many nations, with a milder impact in Portugal. This combination has resulted in substantial increases in per capita income in the post-pandemic period, which is reflected in the country's performance and the external interest in investing in Portugal.

Additionally, the swift implementation of the Recovery and Resilience Plan (PRR) provides a favorable outlook for Portugal, with the expectation of solid GDP growth in the medium and long term, if effectively leveraged.

The ongoing commitment to positive budget performance, evidenced by recent increases in tax revenues, as well as the significant reduction in the ratio of public debt to GDP, driven by a robust macroeconomic environment and notable improvements in public finances, fuels the confidence of Rating agencies that Portugal is entering an extended period as a member of the A Rating group of countries.

These financial achievements stand as a testament to Portugal's dedication and resilience, displaying its ability to turn challenges into opportunities and pave a sturdy path towards a prosperous economic future.

Author

Paulo Lopes is a multi-talent Portuguese citizen who made his Master of Economics in Switzerland and studied law at Lusófona in Lisbon - CEO of Casaiberia in Lisbon and Algarve.

Paulo Lopes