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

Portugal Reclaims A+ Sovereign Rating for First Time in Over a Decade

Usagevpn.com – Portugal’s sovereign credit profile has climbed back to the upper tier of investment-grade territory, as ratings agency Fitch moved the country’s long-term foreign-currency rating from “A” to “A+” on Friday, attaching a “stable outlook” to the new classification. The upgrade marks the first time since March 2011 that Portugal has held an A+ designation, a milestone that the finance ministry and the presidency have both welcomed as validation of years of fiscal discipline.

What Drove the Upgrade

Fitch’s decision rests on what the agency describes as a marked strengthening of Portugal’s public finances. Central to the rationale is a projected trajectory of declining public debt alongside budget balances that the agency judges “considerably stronger than those of comparable countries.” Underpinning both elements, Fitch points to a “strong political commitment to fiscal prudence” that it says has become embedded 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, as well as the institutional advantages conferred by membership in the European Union and the euro area. These strengths, however, are partially offset by what Fitch characterizes as still-elevated levels of accumulated public and external debt.

A Broader Wave of Confidence

The Fitch move arrives in the wake of a broader reassessment of Portuguese credit risk by other major agencies. In August, Standard & Poor’s reaffirmed its unsolicited sovereign ratings of “A+/A-1” for long- and short-term foreign- and local-currency obligations, while retaining a positive outlook. Earlier, in July 2025, Morningstar DBRS had 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 action keeps pace with the recent surge of confidence displayed by both rating houses and capital-market investors.

The Portuguese government has stated that all major financial ratings agencies now assign the country at least an “A” rating, placing it firmly within the upper echelon of investment-grade sovereigns.

Debt Trajectory and Fiscal Path

Fitch projects that Portugal’s public debt-to-GDP ratio will ease from 89.7 percent in 2025 to 87.0 percent in 2026 and further to 82.9 percent by 2028. The agency attributes this decline to the maintenance of primary surpluses combined with moderate nominal growth. Even at the lower end of that path, however, the ratio is expected to remain well above the forecast median of 59.5 percent of GDP for countries rated “A,” underscoring that the country’s debt burden, while shrinking, still exceeds the norm for its peer group.

On the budget side, Fitch estimates the surplus will narrow from 0.7 percent of GDP in 2025 to just 0.1 percent in 2026. The compression is driven by emergency reconstruction spending tied to 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 outlays on public-sector wages and pensions. The agency anticipates that higher social contributions—linked to continued employment growth—and a substantial dividend distribution from state-owned Caixa Geral de Depósitos will partially cushion the fiscal impact.

Looking further ahead, Fitch forecasts an average deficit of roughly 0.4 percent of GDP across 2027 and 2028, a figure that would keep the budget broadly balanced over the medium term while allowing room for cyclical variation.

Government and Presidential Response

Minister of State and Finance Joaquim Miranda Sarmento framed the debt reduction as a collective achievement rather than a purely governmental 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 downward trajectory “cannot be interrupted” and that maintaining the pace of public-debt reduction remains essential. He also called for a sharp reduction in bureaucratic burdens, arguing that excessive regulation “stifles companies and citizens and limits and delays private investment, especially foreign direct investment,” with knock-on effects for the country’s potential GDP.

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

President António José Seguro likewise welcomed the decision on the Presidency’s website, characterizing it as an important external recognition of sustained, multi-government fiscal stewardship.

“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 outline the practical implications he expects: improved financing conditions for the state, businesses, and households; a boost to investment and job creation; and the freeing-up of public resources that can be redirected toward social priorities. He added that when 2026 is later examined in retrospect, the rating upgrade will likely rank among the year’s most consequential economic developments.

Why It Matters

For a country that spent much of the post-2008 period navigating sovereign-debt stress and, at one point, an EU-backed bailout, the return to A+ territory carries implications well beyond the headline. A higher rating typically translates into lower borrowing costs on new issuance, a narrower spread over benchmark eurozone sovereigns, and greater depth of the domestic bond market—all of which reduce the fiscal drag associated with servicing a large stock of debt. At the same time, the persistent gap between Portugal’s projected debt ratio and the median for its rating peers signals that the fiscal consolidation agenda is far from complete, and that future upgrades will depend on sustained primary surpluses, continued nominal growth, and the absence of large external shocks. The interplay between demographic aging pressures, EU-funded investment cycles, and the political will to maintain fiscal prudence will define whether the A+ designation proves durable or merely a waypoint on a longer journey.