Rating agency rules out new Portugal bailout
PORTUGAL aims to sharply reduce its public deficit in 2017 making it unlikely to need a second international bailout in the foreseeable future, Canadian credit rating agency DBRS said.
The country was rescued by a 78 billion euro bailout from the European Union and the International Monetary Fund in 2011, a process that involved steep spending cuts and painful reforms.
It exited the bailout in 2014 without the need for further financing, but its economic growth is still weak and a left-wing government which took office last year has reversed some austerity measures, raising market concerns over the country’s finances.
Asked if a new bailout for Portugal is likely in the near or distant future, DBRS co-head of sovereign ratings Nichola James said, “No, the fiscal flow metrics are improving.”
She pointed out that the government envisages a 0.6 percentage point reduction in the structural deficit – which excludes the effects of the business cycle and one-off items – next year as required by the European Union.
DBRS maintained its rating of Portuguese debt at investment grade level, a move which means the nation’s debt can still be purchased by the European Central Bank’s bond-buying program.
But DBRS warned that the rating could be downgraded if there is “a deterioration in public debt dynamics, resulting from markedly lower growth or a prolonged period of elevated interest rates”. –