Portugal’s credit rating upgraded to ‘A’
Even if political instability arises, S&P believes Portugal’s historical ability to manage such episodes will prevent significant economic disruption.
In a significant boost for Portugal’s economic standing, S&P Global Ratings has upgraded the country’s sovereign credit rating to “A” from “A-”, with a positive outlook.
The upgrade, announced on March 1, 2025, reflects improvements in Portugal’s external financial position and reduced liquidity risks, despite ongoing geopolitical uncertainties.
S&P highlighted Portugal’s strong policy track record, which has supported a steady decline in government debt and continued external deleveraging.
“We take confidence in Portugal's strong policy track record, which has supported a steady decline in government debt and continued external deleveraging,” the agency stated in its report.
However, the agency also noted that the pace of debt reduction is expected to slow between 2025 and 2028, as inflation eases and economic growth normalizes.
The upgrade comes amid a challenging global environment, including potential U.S. tariffs on the European Union.
While Portugal has limited direct exposure to such tariffs, S&P warned that the country could still face indirect effects through its economic ties within the eurozone, particularly with Germany.
“If the U.S. implements tariffs against the EU, Portugal will feel secondary effects through its connections to other eurozone economies, such as Germany,” the agency noted.
Portugal’s economic resilience has been a key factor in the upgrade. S&P praised the country’s robust labor market, limited risks to the banking sector, and strong fiscal dynamics.
The agency also projected that Portugal’s GDP growth, supported by EU stimulus programs like NextGen EU, will average around 2% annually until 2028, outpacing the broader eurozone.
However, growth is expected to soften after 2026 as the impact of EU stimulus fades.
This marks the third credit rating upgrade under the government of Prime Minister Luís Montenegro, and the first by one of the “big three” global rating agencies during his tenure.
Earlier upgrades were made by DBRS, which raised Portugal’s rating to “A (high)” in January, and Scope Ratings, which upgraded the country to “A” in November 2024.
S&P’s decision also reflects confidence in Portugal’s ability to navigate political challenges. Despite parliamentary fragmentation and geopolitical tensions, the agency does not anticipate early elections in 2025.
Even if political instability arises, S&P believes Portugal’s historical ability to manage such episodes will prevent significant economic disruption.
“Portugal has managed episodes of political instability and early elections in the past, and we do not believe economic activity will be substantially affected,” the agency stated.
The upgrade is a milestone in Portugal’s recovery from the sovereign debt crisis that began in 2010, when S&P downgraded the country’s rating from “A+” to “A-”.
Since then, Portugal has steadily rebuilt its financial standing, with all major rating agencies now assigning it an “A” rating or higher for the first time in 13 years.
Credit ratings play a crucial role in determining a country’s borrowing costs, influencing decisions by sovereign wealth funds, pension funds, and other investors.
For Portugal, the upgrade is expected to lower borrowing costs and support its efforts to diversify funding sources, including expanding ties with Asian markets.
Looking ahead, S&P’s positive outlook suggests the possibility of further upgrades in the next two years, provided Portugal maintains its fiscal discipline and economic stability.
The agency’s next review will be closely watched, as will upcoming assessments by Moody’s and Fitch, scheduled for May and March, respectively.
For now, the upgrade underscores Portugal’s progress and resilience, marking a new chapter in its economic recovery.