DBRS: Portugal is better prepared to face the crisis!

The Canadian rating agency gives three reasons to justify the more positive outlook for  Portugal's public accounts in the face of the last financial crisis of 2008. 

Portugal's public finances are better prepared to face the shock of the health crisis in covid-19 than they were when the country faced the previous debt crisis.

The conclusion is from DBRS, with Canada's financial rating agency moving forward with three reasons to take this more benign view.

1.                  Portugal has reached this crisis with balanced public accounts, with the budget and structural deficit close to zero and a primary surplus.

2.                  Despite uncertainties, it is currently less likely that the risks of high amounts of debt will have to be assumed by the state. This is due to a more transparent and controlled state budget scheme.

3.                  The cost of financing the debt is more favorable in the face of the last crisis, even if the debt stock is now higher.

DBRS estimates that public debt in Portugal will again exceed 130% of GDP in 2020, above the peak reached in 2014.

This rating agency, which during the debt crisis was the only one that never put Portugal's rating in "garbage", says that in this crisis the main risk lies in the virus, particularly with regard to "the nature and duration of the health and economic crisis".

DBRS believes that the Portuguese economy can "quickly return to its previous capacity once the pandemic is over."

DBRS and its vice-president Jason Graffam share the view that the longer and more painful the economic shock, the more persistent the pressure on public accounts.

However, Portugal must be committed to a prudent fiscal policy and cannot go into a slouch in its objective of consolidating public accounts, even against the opinion of the civil service and trade union forces.

Source: Jornal de Negócios