S&P raise outlook on Portugal to 'positive'

[PARIS] Ratings agency Standard & Poor's on Friday raised its outlook for Portugal to "positive" from "stable," noting gradual economic recovery in the eurozone country that needed an international bailout during the global financial crisis.

The positive outlook means that S&P could raise Portugal's sovereign credit rating, held at "BB/B," within the next 12 months.

"The outlook revision reflects our view of the gradual recovery of Portugal's real and nominal growth prospects, alongside policymakers' commitment to consolidating public finances over the medium term," the S&P statement said.

"We now believe that Portugal's real GDP will likely rise on average by about 1.8 per cent per year during 2015-2016, on average about 0.2 percentage points higher than we projected at our last review in November," it said.

The agency projected that Portugal's economic recovery would broaden during 2015-2017, due to a rebound in investment from still low levels of 15 per cent of GDP, versus 23 per cent of GDP before the 2008 crisis.

"Although substantial external vulnerabilities remain, renewed external and domestic demand, alongside slowly increasing inflation, should support Portugal's budgetary consolidation process," it added, projecting that net general government debt would drop to 113 per cent of GDP in 2018, from 118 per cent in 2014.

In May last year, Portugal exited a three-year, 78 billion euro (S$116 billion) bailout programme from the European Union and International Monetary Fund, but the government still has to cut spending to meet budget targets.

The centre-right government has embarked on a major belt-tightening plan, slashing public sector salaries and extending the work week from 35 to 40 hours, which have triggered numerous anti-austerity strikes.

Since the start of the austerity programme in 2011, more than 71,000 jobs in the public sector have been cut.

AFP