Canadian ratings agency warns of election deadlock
Financial rating agency DBRS has warned of a potential delay in the implementation of Portugal’s Plan for Recovery and Resilience Plan (PRR) if the electoral result of the legislative elections forces is not clear-cut.
“The most tangible risk in the short term is a potential delay in the implementation of Portugal’s Plan for Recovery and Resilience, especially if government formation drags on over time or if the next government is short-lived and triggers more elections relatively soon,” DBRS said in a commentary on the legislative elections in two weeks’ time.
In the commentary (which does not constitute a rating action), DBRS “is convinced that the future government will not be disruptive in the conduct of fiscal policy.
“We see limited risks to Portugal’s public debt reduction efforts in the coming years, regardless of which party leads the next government,” reads the analysis by the the world’s fourth largest ratings agency (coming in behind Moody’s, S&P and Fitch).
In other words, DBRS does not expect “the next government, whether led by the AD (Democratic Alliance) or the Socialists, to deviate from a decade-long commitment to prudent fiscal policy and debt reduction”.
The agency also points out that the process of beginning the privatisation of TAP was suspended by the collapse of António Costa’s absolute majority government, but believes that “it will probably be restarted after the formation of a new government”.
“The reactivation of the TAP privatisation process could provide another favourable boost to the reduction of Portugal’s public debt. However, we do not expect this to materially alter the trajectory,” says the analysis.
DBRS is just another entity that believes that none of the parties will achieve an absolute majority in parliament, but that “CHEGA’s rise in the opinion polls could give it the opportunity to join a right-wing coalition led by AD or to facilitate an AD minority government“.
In January, DBRS confirmed Portugal’s rating at ‘A’, while maintaining a ‘stable’ outlook.
The rating is an assessment given by financial rating agencies, with a major impact on the financing of countries and companies as it assesses credit risk.
Source: LUSA
