Morningstar DBRS has raised Spain’s long-term foreign and local currency issuer grade by one notch, which thus becomes “A (high)” from “A”, with a stable trend, as announced this Friday by the rating agency. credit rating.
The upgrade reflects Morningstar DBRS’ view that Spain’s credit quality is reinforced by solid economic performancethe reduction of net external liabilities and the constant improvement of public finances.
The agency has highlighted that the solid performance of services exports has driven Spain’s recent economic growth and, in the coming years, it expects favorable labor market conditionsa fall in interest rates, the recovery of purchasing power and the deployment of EU investment funds to support domestic demand.
Likewise, the risk rating agency hopes that “these forces will mitigate the adverse effects of the increased external risks and weaknesses among European peers.
On the other hand, it points out that the Government’s medium-term fiscal plan projects gradual fiscal consolidation and a persistent reduction in debt throughout the decade, but warns that social and political tensions could weaken the Executive’s ability to legislate. key policies, although Morningstar DBRS expects that The Government maintains its commitment to fiscal consolidation and executes its recovery plan.
Thus, the stable trend assigned to Spain’s rating reflects the view that the medium-term risks to the outlook They are balanced.
“Spain’s credit ratings remain supported due to its large and diversified economy, its competitive export sector and its membership in the euro zone”, maintains the agency, for which the income from EU transfers throughout this decade will help underpin the country’s economic performance. , although, on the contrary, he considers the high public debt ratio “a credit weakness.”
In this sense, he points out that the high debt reduces the fiscal margin of the Government to respond to future shocks, accommodate higher financing costs or address rising expenses related to an aging population.
On its side, the dynamics historically volatile employment in Spain and high unemployment, although improving, “remain structural challenges” that limit a more significant convergence of productivity with the euro zone average.
Likewise, although the institutional and territorial challenges posed by the independence movement in Catalonia seem to have been reduced, especially since the Catalan regional elections of May 2024, he warns that political tensions they could resurface.
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