S&P raises Portugal outlook to 'positive' citing economic resilience

Feb 27 (Reuters) - Global ratings agency S&P on Friday raised its outlook on Portugal to "positive" from "stable", citing a resilient economy and steep downward trajectory in government debt levels.

"Portugal will continue to bring net general government debt down, supported by sound fiscal management and solid economic growth," S&P said in a statement.

The ratings agency projected GDP growth accelerating to 2.2% in 2026 from 1.9% in 2025, as authorities rush to deploy "Next Generation" EU grants before this year's deadline drives a surge in public investment.

Looking ahead, S&P forecast growth stabilizing just below 2% annually through 2029, underpinned by robust private-sector balance sheets, sustained EU funding flows and significant net immigration that continues to expand the labor force.

Portugal's competitive advantages, particularly energy costs that remain below the EU average, are key factors supporting medium-term growth prospects alongside strong household and corporate financial positions, the ratings agency said.

On fiscal policy, S&P expressed confidence that balanced budgets would persist through the next scheduled elections in 2029.

Despite Prime Minister Luís Montenegro's center-right coalition governing without a parliamentary majority, his government has passed two consecutive budgets.

The agency also noted Portugal's limited vulnerability to escalating U.S.-EU trade disputes. While services comprise 68% of economic value added, goods exported to America represent just 7% of total merchandise shipments.

S&P affirmed Portugal's long-term foreign and local currency sovereign credit ratings at "A+".