S&P Global Ratings said in a new report that the political dispute between Madrid and Catalonia is unlikely to lead to rating downgrades for Spain, though the autonomous region remains vulnerable.
But the rating agency warned that a sharp slowdown in the Catalan economy caused by escalating political tensions could put downward pressure on the ratings of some 40 rated Spanish companies. However, the impact on a majority of the firms, particularly the larger ones, would be relatively limited in the short term due to their geographically diversified revenues.
The Catalan crisis would also have no immediate impact on the creditworthiness of other rated Spanish local and regional governments, S&P said, since they have no financial links with Catalonia.
S&P's view is based on its expectation that Catalan independence will neither occur nor be recognized by other national governments, including those in the EU. This followed the Catalan government's implied declaration of independence on Oct. 10, which was suspended.
Still, S&P warned that in the longer term, heightened political risks could start to weigh on the growth outlooks for both Catalonia and Spain. Tensions could disrupt business and weaken consumer and business confidence, S&P said, while increased regulatory and legal uncertainty could drive some companies registered in Catalonia to relocate to elsewhere in Spain.
"As such, we believe that under such an adverse political and economic scenario, Catalonia would almost certainly bear the heaviest impact, possibly leading to a sharp slowdown, and maybe even a recession," the rating agency said.
S&P affirmed Spain's ratings ahead of the Catalan independence vote on Oct. 1 and placed Catalonia's ratings on CreditWatch with negative implications after the referendum.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.