Fitch Ratings has upgraded Portugal’s sovereign debt rating from A to A+, assigning a stable outlook to the designation. The decision follows a recent trend of improved sentiment from other major credit agencies and investors toward the Portuguese economy, according to Portugal’s Agency for Investment and Foreign Trade (AICEP). Currently, all major financial ratings agencies assign Portugal an A-tier rating.
The upgrade comes on the heels of similar positive actions by Standard & Poor’s, which reaffirmed its A+/A-1 rating in August with a positive outlook, and Morningstar DBRS, which confirmed an A rating with a stable outlook in July 2025.
In its announcement, Fitch highlighted the strengthening of Portugal’s public finances, particularly the projected trajectory of declining public debt and economic growth rates that outperform comparable nations. The agency attributed this resilience to a “strong political commitment to fiscal prudence,” noting that budget performance has repeatedly exceeded expectations and that persistent current-account surpluses have enhanced the economy’s capacity to absorb external shocks.
Portugal’s governance indicators remain above the median for countries rated A, bolstered by institutional strengths derived from its membership in the European Union and the euro area. However, these advantages are partially counterbalanced by elevated levels of accumulated public and external debt.
Fitch projects that Portugal’s public debt-to-GDP ratio will decline from 89.7% in 2025 to 87.0% in 2026 and further to 82.9% by 2028. This reduction is underpinned by maintained primary surpluses and moderate nominal growth, although the ratio is expected to remain well above the 59.5% forecast median for A-rated countries.
Finance Minister Joaquim Miranda Sarmento welcomed the announcement, describing it as excellent news for Portugal, which has not held an A+ rating since March 2011. He emphasized that the reduction in the debt-to-GDP ratio is the result of years of effort by families and businesses, warning that the process must not be interrupted. Sarmento also called for a sharp reduction in bureaucracy to remove barriers to private investment, particularly foreign direct investment, which he argued would significantly boost the country’s potential GDP.
President of the Republic António José Seguro also praised the decision, calling it a significant external recognition of Portugal’s medium- and long-term performance. He noted that the improved rating will enhance financing conditions for the state, businesses, and households, while freeing up public resources for social needs. Seguro predicted that the upgrade would stand out as one of the most relevant economic stories of 2026.
Looking ahead, Fitch estimates that the budget surplus will narrow from 0.7% of GDP in 2025 to 0.1% in 2026. This contraction is attributed to emergency spending related to storm reconstruction, tax cuts and housing measures outlined in the 2026 State Budget, peak investments linked to the Recovery and Resilience Plan, and increased expenditures on wages and pensions. These pressures are expected to be partially offset by higher social contributions from continued employment growth and substantial dividend distributions from Caixa Geral de Depósitos.
For 2027 and 2028, the agency forecasts an average deficit of approximately 0.4% of GDP. Fitch cautioned that demographic aging and reduced migration could increase spending and strain social contributions, though it noted that the Social Security Financial Stabilisation Fund, with assets equivalent to 13.9% of GDP at the end of 2025, provides a considerable safety margin.
The agency also flagged concerns regarding housing affordability, noting that residential property prices in the first quarter of 2026 were 99% above their fourth-quarter 2019 levels, compared to a 31% increase across the euro area. While this rapid appreciation has not yet created significant short-term macro-financial risks, Fitch warned of growing vulnerabilities in the property market. The agency suggested that a solid banking sector should help contain financial risks associated with household debt.
Additionally, Fitch highlighted the medium-term pressure on public finances posed by NATO’s target of reaching 5% of GDP in defense spending by 2035. Despite this, the rating agency maintained that Portugal’s consistent budgetary policy track record across successive governments mitigates risks associated with political uncertainty.
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