Está en la página 1de 9

Research Update:

Outlook On Portugal Revised To


Stable From Negative On Economic
And Fiscal Stabilization; 'BB/B'
Ratings Affirmed
Primary Credit Analyst:
Marko Mrsnik, Madrid (34) 91-389-6953; marko.mrsnik@standardandpoors.com
Secondary Contact:
Benjamin J Young, London (44) 20-7176-3574; benjamin.young@standardandpoors.com
Table Of Contents
Overview
Rating Action
Rationale
Outlook
Key Statistics
Related Criteria And Research
Ratings List
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 9, 2014 1
1314829 | 301112013
Research Update:
Outlook On Portugal Revised To Stable From
Negative On Economic And Fiscal Stabilization;
'BB/B' Ratings Affirmed
Overview
Portugal's economic and budgetary performance has outpaced our
expectations.
The Portuguese government has fulfilled its key commitments under the
EU-International Monetary Fund Economic Adjustment Program, which it is
scheduled to exit on May 17, 2014, without further official support.
We are therefore revising our outlook on Portugal to stable from negative
and affirming our 'BB/B' ratings.
The stable outlook incorporates our view that Portugal's credit metrics
are stabilizing and that we currently see less than a one-in-three
probability of developments occurring that could lead to an upgrade or
downgrade over the next year.
Rating Action
On May 9, 2014, Standard & Poor's Ratings Services revised its outlook on the
Republic of Portugal to stable from negative. At the same time, we affirmed
our unsolicited 'BB/B' long- and short-term foreign and local currency
sovereign credit ratings on Portugal.
Rationale
The outlook revision reflects our views that:
The economy and the labor market are recovering faster than we projected,
with better-than-expected budgetary performance;
The government has fully implemented the terms of the EU-International
Monetary Fund (IMF) Economic Adjustment Program; and
The combined current and capital account surplus is sufficiently large to
enable Portugal's economy to gradually reduce its large stock of net
external debt (which includes Eurosystem financing).
At an estimated 317% of current account receipts for 2014, Portugal's narrow
net external debt (excluding private nonbank-sector external assets) is the
fourth-largest among the 129 sovereigns we rate. By lending at maturities of
20 years via the European Financial Stability Facility (EFSF) and European
Stability Mechanism (ESM) and at low nominal interest rates averaging 2.5%,
Portugal's official European creditors have improved the central government's
financing profile. In our view, the official financing has also prompted
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 9, 2014 2
1314829 | 301112013
commercial creditors to increase their exposure to Portuguese government debt,
facilitating Portugal's "clean exit" from the EU/IMF program.
Portugal's budgetary performance has strengthened more than we anticipated. In
our baseline scenario, we think Portugal will move ahead with further fiscal
consolidation measures in 2014. In our view, risks to our baseline fiscal and
debt projections include a pending Constitutional Court decision on the
legality of this year's planned personnel and social expenditure cuts. Even
without this negative risk materializing, Portugal's gross and net general
government debt ratios--at about 129% and 118% of GDP, respectively, in 2014
by our estimates--are among the highest of all rated sovereigns.
We think Portugal's real GDP will likely grow on average about 1.4% per year
during 2014-2015, chiefly on the back of sustained export growth, after a 1.4%
contraction in 2013. We also expect a gradual recovery in domestic demand as
private sector hiring continues to recover. We base our confidence in
prospective employment growth partly on the 0.7% year-on-year increase in the
workforce in the final quarter of 2013, and on other signs that the
government's labor reforms are succeeding. In particular, recent European
Commission data confirm that unit labor costs have fallen to below 2000
levels. We consider that the recent positive investment trends indicate that
the capital destocking process (visible in the historically very low levels of
investment as a percentage of GDP) has likely reached its end, mainly given
the 10.5% year-on-year increase in spending on equipment and machinery during
the final quarter of 2013. In our view, this development points to a potential
future increase in the economy's export capacity.
We continue to see risks to real and nominal GDP performance. We think that
domestic demand remains constrained by high stocks of corporate and household
debt, and we see risks to servicing this debt because of declining nominal
household and corporate earnings. Data from the Portuguese central bank, Banco
de Portugal, indicate that resident public and private non-financial sector
gross debt was still at a very high 445% of GDP at year-end 2013, down only
0.5% from a year earlier and still 22% above levels before the 2008 crisis. We
regard this debt as very high, especially taking into account Portugal's
continuous credit contraction and currently negative headline inflation.
Despite the recent pick-up in the labor market, we expect that the employment
ratio as a percentage of the resident population will remain depressed at
close to 43% for the next three years, compared with more than 49% in
2007-2008. Over the medium- to long-term, we think that the low employment
rate--coupled with an unfavorable demographic profile--will likely restrain
the economy's longer-term growth potential.
Between 2010 and 2013, exports increased to an estimated 41% of GDP from 31%
on solid growth in export volumes, while imports, consumption, and investment
all declined. Consequently, the current account shifted to a small surplus in
2013 from a deficit of more than 10%. We believe that the surplus will widen
further in the coming years--toward 2% of GDP--although the gradual recovery
in domestic demand will likely hold it in check.
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 9, 2014 3
1314829 | 301112013
Research Update: Outlook On Portugal Revised To Stable From Negative On Economic And Fiscal Stabilization;
'BB/B' Ratings Affirmed
Despite improved external flows, we consider that the economy's external
vulnerabilities persist, given Portugal's large external debt. What's more,
external borrowing costs for the economy's private sector are still relatively
high. According to European Central Bank data, Portuguese corporate borrowers
pay significantly more on new loans than the eurozone average, pointing in our
view to an impaired monetary transmission mechanism. The difficult and
expensive funding conditions for the real economy, combined with deflationary
pressures, are constraints which appear unlikely to subside in the near term.
These challenging conditions may yet jeopardize the gradual and orderly
deleveraging process and could, in turn, weaken the pace of economic recovery.
The government's medium-term strategy includes measures aiming to improve the
business environment, in addition to preparing a plan to facilitate corporate
debt restructuring and the development of instruments that would support
capitalization of the corporate sector. The continuation of the so-far
successful privatization process and restructuring of the state-owned
companies, simplification of labor market legislation and the tax code,
cutting of red tape, improving the regulatory environment, and fostering of
competition in services and product markets are also on the agenda.
Portugal's shallower-than-expected recession in 2013, together with the
government's budgetary consolidation measures, have contributed to a
smaller-than-anticipated general government deficit at 4.9% of GDP in 2013,
including the 0.4% of GDP banking sector recapitalization. We previously
expected the government would meet but not outperform its 2013 target of 5.5%,
excluding the recapitalizations (see "Portugal 'BB/B' Ratings Affirmed;
Outlook Negative On Policy Uncertainty," published Jan. 17, 2014, on
RatingsDirect). This was achieved despite several rulings by the
Constitutional Court, which we consider have constrained the government's
fiscal policy leeway. We think the general government deficit will be slightly
less than 4% of GDP this year and then continue falling thereafter, owing to
the slowly improving economic backdrop and favorable labor market
developments. Despite future potential Constitutional Court rulings, the
government will, in our view, find alternative measures to meet its budgetary
targets, if necessary.
We project net general government debt at about 118% of GDP during 2014-2015,
before declining to about 113% of GDP in 2017, as a result of narrowing budget
deficits, economic recovery, and the gradual use of existing cash deposits
that we estimate represented at 10% of GDP at year-end 2013. The
implementation of the new EU accounting framework, or European System of
National and Regional Accounts, ESA 2010, as of September this year, will not
have a significant impact on government debt levels, in our view. In its
2014-2018 Fiscal Strategy, the government estimates gross government debt in
2014 at 130.2% of GDP (under the existing ESA 95) or 127.5% of GDP (under ESA
2010). We anticipate general government interest expenditure to general
government revenues at about 10.2% on average over 2014-2017. We expect that
the government will continue reducing the budget deficit and implementing
structural reforms after Portugal exits the EU/IMF program. Such efforts, in
our view, would positively contribute to mitigating domestic shocks and
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 9, 2014 4
1314829 | 301112013
Research Update: Outlook On Portugal Revised To Stable From Negative On Economic And Fiscal Stabilization;
'BB/B' Ratings Affirmed
gradually decrease the economy's vulnerability to external shocks.
Outlook
The stable outlook incorporates our view that Portugal's credit metrics are
stabilizing and that risks to the ratings are broadly balanced over the next
year.
We could raise the ratings on Portugal if we observed that:
The government continues to implement structural reforms beyond the
termination of the EU/IMF program, to effectively improve the economy's
growth potential and contribute to its ongoing rebalancing; and
Orderly private sector deleveraging is accelerated by a pronounced and
sustained improvement in credit conditions, coupled with a restoration of
an effective monetary transmission mechanism.
We could lower the ratings if, all other things being equal, we observed that:
Reform implementation wanes after the exit from the EU/IMF program, for
example due to policy complacency;
Eurozone policies fail to support--directly or indirectly--government
borrowing costs at sustainable levels and to stem potential capital
outflows; and
The government's budgetary position deviates significantly from our
current expectations on the back of weakening growth or currently
unexpected one-off expenses that would push up debt (that is, excluding
the impact of ESA 2010 implementation, which in itself will not affect
the ratings).
Key Statistics
Table 1
Republic of Portugal - Selected Indicators
2008 2009 2010 2011 2012 2013e 2014f 2015f 2016f 2017f
Nominal
GDP (US$
bil)
252 234 229 238 212 221 221 226 234 242
GDP per
capita
(US$)
23,872 22,164 21,652 22,499 20,122 21,062 21,110 21,613 22,332 23,120
Real GDP
growth (%)
(0.0) (2.9) 1.9 (1.3) (3.2) (1.4) 1.1 1.6 1.8 2.0
Real GDP
per capita
growth (%)
(0.2) (3.0) 1.8 (1.2) (3.0) (0.8) 1.3 1.6 1.7 1.9
Change in
general
government
debt/GDP
(%)
4.4 10.5 12.4 13.3 11.8 5.2 (0.2) 2.2 1.3 0.9
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 9, 2014 5
1314829 | 301112013
Research Update: Outlook On Portugal Revised To Stable From Negative On Economic And Fiscal Stabilization;
'BB/B' Ratings Affirmed
Table 1
Republic of Portugal - Selected Indicators (cont.)
General
government
balance/GDP
(%)
(3.6) (10.2) (9.8) (4.3) (6.4) (4.9) (3.8) (2.7) (2.1) (1.8)
General
government
debt/GDP
(%)
71.7 83.7 94.0 108.2 124.0 128.8 126.4 125.6 122.8 119.4
Net
general
government
debt/GDP
(%)
67.6 80.2 90.1 98.8 114.2 118.6 118.5 118.4 116.1 113.2
General
government
interest
expenditure/revenues
(%)
7.5 7.2 7.0 9.7 10.6 9.8 10.0 10.3 10.2 10.3
Oth dc
claims on
resident
non-government
sector/GDP
(%)
167.4 174.6 169.8 168.6 162.6 153.2 146.0 141.8 137.1 134.3
CPI growth
(%)
2.6 (0.8) 1.4 3.7 2.8 0.3 0.4 1.0 1.3 1.5
Gross
external
financing
needs/CARs
+ usable
reserves
(%)
293.1 295.4 288.5 257.8 241.2 218.8 220.8 209.0 198.9 187.8
Current
account
balance/GDP
(%)
(12.7) (10.9) (10.6) (7.0) (2.0) 0.5 1.1 1.3 1.5 1.9
Current
account
balance/CARs
(%)
(28.7) (29.2) (25.0) (15.0) (4.2) 1.1 2.3 2.6 2.8 3.4
Narrow net
external
debt/CARs
(%)
290.0 407.6 347.0 285.4 338.1 331.5 317.0 290.6 267.5 240.4
Net
external
liabilities/CARs
(%)
207.2 306.6 256.3 209.2 246.7 241.3 228.7 210.5 191.2 171.3
Other depository corporations (dc) are financial corporations (other than the central bank) whose liabilities are included in the national definition
of broad money. Gross external financing needs are defined as current account payments plus short-term external debt at the end of the prior year
plus nonresident deposits at the end of the prior year plus long-term external debt maturing within the year. Narrow net external debt is defined as
the stock of foreign and local currency public- and private- sector borrowings from nonresidents minus official reserves minus public-sector liquid
assets held by nonresidents minus financial sector loans to, deposits with, or investments in nonresident entities. A negative number indicates net
external lending. e--Standard & Poor's estimate. f--Standard & Poor's forecast. CPI--Consumer price index. CARs--Current account receipts.
The data and ratios above result from S&P's own calculations, drawing on national as well as international sources, reflecting S&P's independent
view on the timeliness, coverage, accuracy, credibility, and usability of available information.
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 9, 2014 6
1314829 | 301112013
Research Update: Outlook On Portugal Revised To Stable From Negative On Economic And Fiscal Stabilization;
'BB/B' Ratings Affirmed
Related Criteria And Research
Related Criteria
Sovereign Government Rating Methodology And Assumptions, June 24, 2013
Methodology For Linking Short-Term And Long-Term Ratings For Corporate,
Insurance, And Sovereign Issuers, May 7, 2013
Criteria For Determining Transfer And Convertibility Assessments, May 18,
2009
Related Research
Sovereign Defaults And Rating Transition Data, 2013 Update, April 18,
2014
In accordance with our relevant policies and procedures, the Rating Committee
was composed of analysts that are qualified to vote in the committee, with
sufficient experience to convey the appropriate level of knowledge and
understanding of the methodology applicable (see 'Related Criteria And
Research'). At the onset of the committee, the chair confirmed that the
information provided to the Rating Committee by the primary analyst had been
distributed in a timely manner and was sufficient for Committee members to
make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and critical issues
in accordance with the relevant criteria. Qualitative and quantitative risk
factors were considered and discussed, looking at track-record and forecasts.
The chair ensured every voting member was given the opportunity to articulate
his/her opinion. The chair or designee reviewed the draft report to ensure
consistency with the Committee decision. The views and the decision of the
rating committee are summarized in the above rationale and outlook.
Ratings List
Ratings Affirmed; Outlook Action
To From
Portugal (Republic of) (Unsolicited Ratings)
Sovereign Credit Rating BB/Stable/B BB/Negative/B
Transfer & Convertibility Assessment AAA AAA
BANIF Banco Internacional do Funchal S.A.
Comboios de Portugal E.P.E
Metropolitano de Lisboa E.P.
Caixa Geral de Depositos S.A.
Banco Espirito Santo S.A.
Senior Unsecured* BB BB
*Guaranteed by the Republic of Portugal.
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 9, 2014 7
1314829 | 301112013
Research Update: Outlook On Portugal Revised To Stable From Negative On Economic And Fiscal Stabilization;
'BB/B' Ratings Affirmed
Additional Contact:
SovereignEurope; SovereignEurope@standardandpoors.com
This unsolicited rating(s) was initiated by Standard & Poor's. It may be based
solely on publicly available information and may or may not involve the
participation of the issuer. Standard & Poor's has used information from
sources believed to be reliable based on standards established in our Credit
Ratings Information and Data Policy but does not guarantee the accuracy,
adequacy, or completeness of any information used.
Complete ratings information is available to subscribers of RatingsDirect at
www.globalcreditportal.com and at spcapitaliq.com. All ratings affected by
this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left
column. Alternatively, call one of the following Standard & Poor's numbers:
Client Support Europe (44) 20-7176-7176; London Press Office (44)
20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm
(46) 8-440-5914; or Moscow 7 (495) 783-4009.
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 9, 2014 8
1314829 | 301112013
Research Update: Outlook On Portugal Revised To Stable From Negative On Economic And Fiscal Stabilization;
'BB/B' Ratings Affirmed
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P
reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites,
www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription) and www.spcapitaliq.com
(subscription) and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information
about our ratings fees is available at www.standardandpoors.com/usratingsfees.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective
activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established
policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain
regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P
Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any
damage alleged to have been suffered on account thereof.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and
not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase,
hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to
update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment
and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does
not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be
reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part
thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval
system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be
used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or
agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not
responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for
the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL
EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING
WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no
event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential
damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by
negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Copyright 2014 Standard & Poor's Financial Services LLC, a part of McGraw Hill Financial. All rights reserved.
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 9, 2014 9
1314829 | 301112013

También podría gustarte