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S&P upgrades Spain on economic growth, budgetary consolidation

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S&P upgrades Spain on economic growth, budgetary consolidation

S&P Global Ratings raised the unsolicited long-term sovereign credit ratings on Spain to A- from BBB+, with a positive outlook, citing the country's strong economic performance and continuing budgetary consolidation despite political tensions stemming from Catalonia's failed independence bid.

The rating agency projected the Spanish economy to expand by 2.7% in 2018 after 3.1% growth in 2017. The pace of expansion is expected to moderate through 2021.

"Generally, we expect Spain's economic growth will surpass the eurozone average throughout that period. We also expect economic performance to remain balanced, with domestic demand remaining the main driver of growth," S&P said.

"In this context, we expect rising private consumption on the back of employment growth, low inflation, favorable financial conditions, and strong consumer sentiment," said the rating agency, which also anticipates growth in investment activity.

Spain's budgetary consolidation is also anticipated to continue through 2021, although at a slower pace, following an estimated budget deficit of about 3.1% of GDP in 2017, according to S&P.

The country's current account surplus will average just below 2% of GDP from 2018 to 2021, S&P said. However, the decline in general government debt will be slow over the forecast period, only falling to 86% of GDP in 2021 from 89% in 2016.

On Catalonia, S&P said uncertainty may persist depending on the future regional government's policy direction, but heightened political tensions have yet to significantly affect the national economy.

S&P said it could again upgrade Spain's rating within the next 24 months upon further consolidation of public finances and easing of tensions in Catalonia.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.