Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic 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 rating’s 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 announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the Portuguese Republic (long-term local- and foreign-currency issuer and senior unsecured debt ratings: A/Stable; short-term local and foreign-currency issuer ratings: S-1/Stable) on 13 May 2025.

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 ratings history can be found on scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

Portugal’s credit ratings are supported by: i) the substantial reduction in public debt, underpinned by a strong track record of prudent fiscal policy; ii) improvements in domestic economic resilience and the external position, supported by EU and euro area membership; and iii) a favourable public debt profile.

Portugal’s credit ratings are challenged by: i) an elevated, albeit declining stock of public debt; ii) a moderate growth potential constrained by structural factors including an ageing population, limiting labour force expansion and placing long-term pressure on public spending; and iii) vulnerability to external shocks, given the open economic structure.

The Portuguese economy grew by 1.9% in 2024, after 2.6% growth in 2023. This sustained expansion was mostly driven by a gradual slowdown in inflation, which strengthened households’ purchasing power and boosted private consumption, as well as by a recovery in goods exports. Looking ahead, Scope expects real GDP growth of 2.1% in 2025 and 1.9% in 2026. Economic activity will continue to benefit from lower inflation and more favourable financing conditions that should support private investments. Additionally, the implementation of the Recovery and Resilience Plan will accelerate public investments until the end of next year.

Nevertheless, recent developments in global trade, in particular higher tariffs applied by the US on imports globally, have led to increased uncertainty regarding Portugal's economic growth outlook. While the direct impact is relatively low with exports to the US accounting for less than 7% of total goods exports, slowing economic growth in key trading partners including Spain (26% of exports), France (12%) and Germany (12%) could lead to adverse indirect effects.

Portugal’s strong track record of prudent fiscal policies drove a primary surplus of 1.6% of GDP in 2022, after having recorded primary deficits of 2.9% of GDP in 2020 and 0.5% in 2021. As a result, the headline fiscal balance has shown steady improvement, shifting from a 5.8% of GDP deficit in 2020 to a 1.2% of GDP surplus in 2023. This was followed by a slight decline to 0.7% of GDP last year. Improving fiscal balances, alongside the robust economic recovery, supported a strong reduction of the public-debt-to GDP ratio over the past five years, which declined from a 134% peak in 2020 to 95% in 2024.

Scope projects lower headline fiscal surpluses going forward at 0.3% of GDP in 2025 and 0.2% of GDP in 2026. Several fiscal policy measures are being implemented with the aim of supporting growth, increasing salaries for public sector employees and those on minimum wage, strengthening social protection, and selectively reducing fiscal pressure on segments of the population including the young. These targeted measures combined with solid economic growth should continue to support a gradual decline in public-debt-to-GDP, which Scope expects to reach 75.5% by 2030.

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

Upside scenarios for the long-term ratings and Outlooks are (individually or collectively):

1. Greater economic diversification, higher wealth levels, and sustained current account surpluses, further improving its external position and enhancing economic resilience; and/or
    
2. A significant reduction in the debt-to-GDP ratio driven by strong fiscal discipline.

Downside scenarios for the long-term ratings and Outlooks are (individually or collectively):

1. Weakening fiscal performance, reversing the progress in debt reduction and undermining the fiscal outlook; and/or
    
2. GDP growth prospects weaken materially, for example driven by stalled structural reforms or declining reform momentum.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 January 2025) is available on 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: Eiko Sievert, Executive Director
 
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