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S&P upgrades Spain, says economy resilient amid looming election

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S&P upgrades Spain, says economy resilient amid looming election

S&P Global Ratings upgraded Spain's unsolicited foreign- and local-currency long- and short-term sovereign credit ratings to A/A-1 from A-/A-2, with a stable outlook, citing the resilience of its economy despite a prolonged political stalemate that has put the country on the path to another general election.

"Despite the political impasse, Spain's GDP growth should continue to exceed the eurozone average over 2019-2022, while the country's external balance sheet and budgetary position continues to improve," the rating agency said.

The Spanish economy is projected to expand 2.2% in 2019, before slowing down over the next three years, according to S&P Global Ratings.

The rating agency also expects Spain's general government deficit to narrow to about 2% of GDP in 2019, the lowest since 2007, mainly due to cyclical factors. The country's net general government debt is forecast to fall to 82.8% of GDP in 2022 from a peak of 89.2% in 2016.

The upgrade came days after acting Prime Minister Pedro Sánchez's Socialist Party failed to strike a deal with other political parties on forming a government, setting the stage for a Nov. 10 election, the country's fourth ballot in four years.

"A more fragmented political landscape diminishes the likelihood that the next government will benefit from a sufficiently strong mandate to deal with existing economic challenges," S&P Global Ratings warned.

Separately, DBRS confirmed Spain's long- and short-term foreign- and local-currency issuer ratings at A/R-1 (low) and revised the trend on the ratings to positive, citing the country's economic growth and improvements in public finances.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.