World Economy

Spain Upgraded to 'BBB+' 

Spain Upgraded to 'BBB+' Spain Upgraded to 'BBB+' 

Standard & Poor's Ratings Services raised its long-term sovereign credit rating of Spain to 'BBB+' from 'BBB', on Friday Oct. The outlook is stable. "At the same time, we affirmed our 'A-2' short-term sovereign credit rating on Spain".

"The upgrade reflects our view of Spain's strong, balanced economic performance over the past four years, which is gradually benefiting public finances," the rating agency said.  "We now expect real GDP growth to average 2.7% over 2015-2017 versus our previous forecast of 2.2% after our review in April this year.

Combined with our projection of the GDP deflator at about 0.6% this year, this implies nominal GDP growth of 3.8% in 2015 and more than 4% for the next three years, compared with average nominal GDP contraction of about 0.9% from 2011-2014".

A shift toward consistently higher real and nominal growth would benefit Spain's debt dynamics, given that the Spanish Treasury refinances central government and regional debt at an average cost of less than 1%, it said. Some of Spain's growth drivers—including front-loaded tax cuts, lower oil prices, and a weaker exchange rate—are likely to fade.

Others—including labor and other structural reforms, as well as easier financing conditions—will, "in our view", contribute permanently to Spain's more dynamic recovery than peers'.

One key change is that the Spanish economy is more open than it was seven years ago.  

"By the end of 2015, we expect exports to represent about 34% of Spain's GDP versus 25% in 2008", it said.