Fitch upgrades Portugal’s rating to A+ and says outlook is “stable”

Portugal Reclaims A+ Sovereign Rating for the First Time Since 2011

Poinews.com – Fitch Ratings has moved Portugal’s sovereign debt classification up one notch, from “A” to “A+”, attaching a “stable outlook” to the new grade. The decision, published on the agency’s website on Friday, marks the country’s return to the upper tier of the A category for the first time since March 2011 — a milestone that had eluded Lisbon’s policymakers for over a decade.

The upgrade lands amid a broader reassessment of Portugal’s fiscal trajectory by the global ratings community. In August, Standard & Poor’s reaffirmed its unsolicited long- and short-term foreign and local-currency sovereign ratings at “A+/A-1” while retaining a positive outlook. Earlier, in July 2025, Morningstar DBRS confirmed the Republic of Portugal’s rating at “A” (high) with a stable outlook. Portugal’s Agency for Investment and Foreign Trade (AICEP) noted that the Fitch move keeps pace with the wave of confidence now flowing from both rating houses and international investors.

What Drove the Upgrade

At the core of Fitch’s reasoning is what the agency describes as a marked strengthening of Portugal’s public finances. The projected path of declining public debt, combined with budget balances that compare favourably against peer economies, forms the backbone of the decision. Underpinning those numbers, Fitch points to a “strong political commitment to fiscal prudence” that has persisted across successive governments.

“The upgrade reflects the strengthening of Portugal’s public finances, including a projected path of declining public debt and budget balances that are considerably stronger than those of comparable countries, supported by a strong political commitment to fiscal prudence.”

The agency also credits governance indicators that sit above the median for countries carrying an “A” rating, alongside institutional strengths conferred by membership of the European Union and the euro area. Persistent current-account surpluses and repeatedly better-than-expected budget outcomes have, in Fitch’s assessment, bolstered the economy’s capacity to “absorb shocks” without derailing the fiscal consolidation path.

The Debt Trajectory

Fitch projects that Portugal’s public debt-to-GDP ratio will decline from 89.7% in 2025 to 87.0% in 2026 and further to 82.9% by 2028. The downward path is underwritten by the maintenance of primary surpluses and moderate nominal growth. Even at the 2028 projection, however, the ratio will remain well above the forecast median of 59.5% of GDP for countries rated “A” — a gap the agency flags as a continuing vulnerability.

On the budget side, Fitch estimates the surplus will narrow sharply from 0.7% of GDP in 2025 to just 0.1% in 2026. The compression is attributed to emergency reconstruction spending after recent storms, tax-cut and housing measures embedded in the 2026 State Budget, peak investment associated with the loan component of the Recovery and Resilience Plan, and rising wage and pension outlays. Partial offsets are expected from higher social contributions tied to continued employment growth and from a significant dividend distribution by Caixa Geral de Depósitos. Looking further ahead, the agency forecasts an average deficit of roughly 0.4% of GDP across 2027 and 2028.

Government Reaction

Minister of State and Finance Joaquim Miranda Sarmento framed the debt reduction as a collective achievement rather than a purely technocratic one.

“The fall in the debt-to-GDP ratio is the result of the work of families and businesses in recent years.”

Sarmento stressed that the consolidation process “cannot be interrupted” and that maintaining the pace of public debt reduction remains essential. He also called for a sharp reduction in bureaucracy, arguing that excessive regulation “stifles companies and citizens and limits and delays private investment, especially foreign direct investment,” with knock-on effects on potential GDP.

On the social platform X, the finance minister characterised the upgrade as “excellent news for Portugal, which regains an A+ rating for the first time since March 2011.”

President António José Seguro issued a welcome statement on the Presidency website, framing the decision as an external validation of sustained, cross-government policy choices.

“This is excellent news for the country and an important external recognition of Portugal’s performance, the result of a medium- and long-term evolution, sustained by the efforts of the Portuguese people and by a responsible orientation maintained under different governments.”

Seguro went on to note that a stronger rating should translate into improved financing conditions for the state, businesses, and households, supporting investment and job creation while freeing public resources for social priorities. He added that when 2026 is later examined in retrospect, the rating upgrade would likely rank among the year’s most consequential economic developments.

Broader Implications

For market participants, the upgrade narrows the spread Portugal pays on sovereign bonds relative to other A-rated issuers, potentially lowering borrowing costs for municipalities, state-owned enterprises, and the broader corporate sector that benchmarks against the government curve. For households, cheaper state financing can ease pressure on public-service budgets. For foreign investors, the move reinforces the narrative that Portugal’s post-2020 fiscal reset — accelerated by EU recovery funds and a post-pandemic growth rebound — has produced durable structural improvement rather than a cyclical blip.

Nonetheless, the residual distance between Portugal’s debt level and the A-category median means that any renewed global risk-off episode, a sharp slowdown in nominal growth, or a fiscal slippage could prompt a re-examination of the rating. The stable outlook signals that Fitch sees no near-term pressure in either direction, but the agency’s own language — noting that accumulated public and external debt remain “still-high” — underscores that the upgrade is conditional on the consolidation path continuing uninterrupted.