Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly-rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Portuguese Republic (BBB+/Stable; S-2/Stable) on 21 January 2021, incorporating the update from the sovereign methodology. The review resulted in no action on the assigned ratings. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

The Portuguese Republic’s long-term ratings of BBB+ are underpinned by the following credit strengths: i) the authorities’ track record of prudent fiscal policy and commitment to fiscal consolidation over the medium term; ii) a resilient debt profile, including a high cash buffer and significant shares of government debt held by the official sector; iii) the gradual unwinding of structural economic imbalances, including current account rebalancing and structural unemployment reduction. These factors increase the country’s resilience to economic shocks and allowed for a moderate countercyclical fiscal response to the current crisis. Challenges relate to: i) a modest growth potential despite a still significant wealth-gap with euro area peers; ii) high external debt; and iii) elevated implicit liabilities, including from adverse demographic trends.

For the updated scorecards accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Rating Methodology: Sovereign Ratings, 9 October 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Alvise Lennkh, Executive Director.

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