S&P upgrades Spain's debt grade to 'A' citing growth

[WASHINGTON] Ratings agency S&P Global on Friday upgraded Spain's sovereign debt to "A" from "A-", pointing to rosier prospects for economic growth and a shrinking budget deficit.

The increase was the second since March of last year but S&P said the outlook for Madrid was now "stable".

"The upgrade reflects that balanced economic growth and an improving budgetary position have put Spain's government debt-to-GDP (gross domestic product) ratio on a firmer downward trajectory," S&P Global said in a statement.

"The country has also made progress in public and private sector deleveraging."

S&P analysts forecast a 2019 budget deficit of about 2 per cent of GDP, the lowest in 12 years, and while the economy is projected to grow 2.2 per cent, slowing through 2022.

The Spanish economy has performed well, despite a political stalemate and a broader economic slowdown in Europe, and should withstand the fallout of a no-deal Brexit, the statement said.

There are risks to the outlook, however, according to S&P. Spanish political parties failed to form a government following April elections and a fresh vote is now scheduled for November.

A minority government could yet emerge from the next elections, leaving authorities without the political capital to advance further budgetary measures to protect public finances from future economic shocks.

"We anticipate that political tensions in Catalonia will persist," the statement said.

AFP