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 Portuguese Republic (long-term local- and foreign-currency issuer and senior unsecured debt ratings: BBB+/Positive; short-term local- and foreign-currency issuer ratings: S-2/Positive) on 24 October 2022.

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 Portuguese Republic’s long-term ratings of BBB+ are underpinned by the following credit strengths: i) the country’s institutional strength, bolstered by the membership in the EU and euro area which reinforce the resilience to shocks; ii) good track record of fiscal consolidation and implementation of structural reforms which have improved the business environment and support long-term growth prospects; iii) favourable debt profile and high cash buffer. Challenges relate to: i) an elevated stock of public debt; ii) a moderate growth potential with adverse demographic trends, impacting the labour force and placing long-term pressure on public spending; and iii) vulnerability to external shocks, given the open economic structure.

The Positive Outlook reflects Scope’s view that risks to the ratings are tilted to the upside over the next 12 to 18 months.

The rating could be upgraded if, individually or collectively, Portugal’s: i) debt sustainability strengthened, underpinned by sustained improvements in Portugal’s fiscal fundamentals; and/or ii) medium-term growth prospects improved, supported by continued implementation of growth-enhancing structural reforms.

Conversely, the Outlook could be revised to Stable, if, individually or collectively: i) debt sustainability weakened, for example due to protracted fiscal deterioration; and/or ii) there was a fading commitment to or a reversal of structural reforms, leading to markedly lower GDP growth.

For the updated rating report accompanying this review, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 September 2022) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
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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