25 Apr 2014
Fitch Upgrades Spain to 'BBB+' as fiscal track record is strong
FXStreet (San Francisco) - Fitch Ratings decided to upgrade Spain sovereign rating to 'BBB+' from 'BBB' as the Kingdom's "risks to Spain's creditworthiness have decreased since the sovereign was downgraded" in June 2012.
In addition, the agency affirmed the Spain's "fiscal track record over the past two years has been strong," as "its headline fiscal deficit (excluding bank support) declined by 2.5% of GDP in 2012-13, despite a 2.2% drop in nominal GDP over the same period."
All about excluding bank support in official accounts and that Fitch doesn't expect that early parliamentary elections will not be called before 2015. Debt ratio to peak at 104% of GDP in 2016.
Key quotes:
We project that public debt will peak in 2016 at 104% and decline gradually thereafter, assuming an effective interest rate close to current levels.
The general government deficit remains large, which we forecast at 5.7% of GDP for 2014. Public debt/GDP has risen 11pp per year on average since 2008 and we expect the ratio to peak at 104% of GDP in 2016.
Medium-term forecasts assume some slippage relative to official public deficit targets. The agency maintains its potential growth assumption of 1.5% in the second half of the decade.
Banking sector risks have been adequately captured by the authorities in the context of the 2012-13 financial-sector reform programme (supported by the European Stability Mechanism, ESM) and that additional capital injections required from the Spanish sovereign will not be large.
We assume no official debt relief on Spain's existing EUR41.3bn loan from the ESM.
Spain and the eurozone as a whole will avoid long-lasting deflation, such as that experienced by Japan from the 1990s.
In addition, the agency affirmed the Spain's "fiscal track record over the past two years has been strong," as "its headline fiscal deficit (excluding bank support) declined by 2.5% of GDP in 2012-13, despite a 2.2% drop in nominal GDP over the same period."
All about excluding bank support in official accounts and that Fitch doesn't expect that early parliamentary elections will not be called before 2015. Debt ratio to peak at 104% of GDP in 2016.
Key quotes:
We project that public debt will peak in 2016 at 104% and decline gradually thereafter, assuming an effective interest rate close to current levels.
The general government deficit remains large, which we forecast at 5.7% of GDP for 2014. Public debt/GDP has risen 11pp per year on average since 2008 and we expect the ratio to peak at 104% of GDP in 2016.
Medium-term forecasts assume some slippage relative to official public deficit targets. The agency maintains its potential growth assumption of 1.5% in the second half of the decade.
Banking sector risks have been adequately captured by the authorities in the context of the 2012-13 financial-sector reform programme (supported by the European Stability Mechanism, ESM) and that additional capital injections required from the Spanish sovereign will not be large.
We assume no official debt relief on Spain's existing EUR41.3bn loan from the ESM.
Spain and the eurozone as a whole will avoid long-lasting deflation, such as that experienced by Japan from the 1990s.