Fifteen years after Troika, Portugal’s rating goes up in several agencies

The country, which in 2011 had to resort to the rescue of the European Union and the International Monetary Fund, now has more balanced public accounts and a ratio of public debt to gross domestic product (GDP) in a downward trend. This has improved financing conditions and strengthened external credibility.

Fitch rose Portugal’s ‘rating’ from ‘A’ to ‘A+’, with a stable ‘outlook’ on September 4.

The Ministry of Finance pointed out, in a reaction note, that “the rises promoted by S&P (one in February 2025 from A to A and another in August 2025 from A to A+) is already the fourth rating review that the country has registered in the last two years.”.

The increase in Portugal's sovereign credit note is part of a broader transformation of the economies of southern Europe which have been at the heart of the euro crisis and which are now, in some cases, financed under more favourable conditions than traditionally considered more solid countries.

Portugal thus presents a position vis-à-vis investors radically different from that it had during the rescue.

Economist Ricardo Ferraz points out to Lusa: “since the Troika entered Portugal and since the time of Pedro Passos Coelho’s government, after that of António Costa and now more recently of Luís Montenegro, what we have seen is a great concern, well, with the question of the balance of public finances”.

“ Since the entry of the Troika, in which it took part of a very significant deficit, above 11% of GDP, this deficit has been reduced until we were finally able to achieve a surplus by 2019. Then we went back into a deficit situation when the pandemic took place, but after the pandemic we re-recorded surpluses”, therefore excluding that temporary factor, “there is clearly a trend towards improvement in the balance,” notes.

This trend “also reflects on a public debt that has been falling in terms of ratio”, making Portugal today “in a much more comfortable situation than it was a few years ago,” he stressed.

“ It is very important the way we have been taking to credit ourselves and it certainly has repercussions on debt markets and investors' prospects for the risk of Portuguese debt,” he said, admitting that there is currently an unfavorable situation affecting all countries.

But “if Portugal hadn’t made this path and didn’t continue to give priority to the sustainability of public finances, we could certainly be in a particularly difficult situation at the moment with interest above Spain,” he concluded.

The economist recalls that, in 2010, the Portuguese Finance Minister said that if debt interest reached 7%, Portugal at the time would be obliged to ask for external help, so “at an adverse external juncture where countries’ debt interest is rising, it is essential that the government continues to consider maintaining balanced public accounts as a priority”.

“We all know the enormous sacrifices that the Portuguese had to face when Portugal, in an adverse situation, failed to derail its accounts,” he said.

António Mendonça, a professor at ISEG, points out to Efe that Portugal's international perception has improved significantly in the last decade, thanks to the reduction of deficit and public debt, the improvement of external accounts, the greater strength of the financial system and the ability to maintain positive growth in an adverse scenario.

To Mendonça, Fitch’s increase in the grade is “a relevant sign of trust” that can immediately facilitate the financing of the state, companies and families, as well as strengthen the country’s external credibility.

However, the economist recommends avoiding “excessively triumphalist” interpretations, as agencies tend to assess future prospects based on conjuncture conditions, paying less attention to structural vulnerabilities and the creation of dependencies.

José Reis, professor at the School of Economics of the University of Coimbra, also recognizes the importance of Fitch's decision, but warns that it reflects, above all, “the short-term vision of the markets” and does not solve the structural weaknesses of the Portuguese economy.

Banco de Portugal also warns in an analysis published in the Economic Bulletin that the burden of public debt in GDP “will increase from the beginning of the next decade”.

According to the projections of the central bank, the burden of public debt in GDP in Portugal will no longer decrease at the beginning of the next decade, according to a base scenario that incorporates the costs associated with the aging population, but does not take into account policy measures beyond those already considered in the projections.

“ The budgetary balance (i.e. the difference between revenue and public expenditure) is expected to deteriorate gradually, reaching a deficit of 2.7% of GDP in 2035", reads in the analysis, while the government debt ratio “should reach 75% of GDP in 2033, then starting a path of rise, even if contained in the horizon presented”.