Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Kingdom of Spain (A-/Stable; S-1/Stable) on 29 November 2021.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

The Kingdom of Spain’s long-term ratings of A- are underpinned by the following credit strengths: i) Spain’s euro area membership, and in particular, the forceful European monetary and fiscal policy response to the Covid-19 shock; ii) the country’s large and diversified economy; and iii) the gradual reduction of external and financial imbalances. These factors increase the country’s resilience to economic shocks and allowed for the implementation of a countercyclical fiscal response to the current crisis. Challenges relate to: i) high public and external debt levels; ii) elevated structural unemployment and low productivity growth; and iii) adverse demographic developments in form of a rapidly ageing and declining population, placing structural pressure on public finances and weighing on growth potential.

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months.

The rating/Outlook could be downgraded over the next 12-18 months if: i) a weaker than expected economic recovery and/or protracted fiscal deterioration would result in a weakened debt sustainability; and/or ii) reforms are delayed or introduced adversely impacting the economic and fiscal outlook.

Conversely, the rating/Outlook could be upgraded if: i) reforms are introduced that further raise the country’s growth potential; and/or ii) public finances improve meaningfully.

For the updated report accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (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: Jakob Suwalski, Director.

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