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“The outlook revision reflects additional evidence that European institutions will continue to support Portugal’s adjustment programme, given the government’s commitment to budgetary and structural reforms”, S&P said in the statement.
Portugal may get an additional year to narrow its budget deficit as the country’s economic outlook worsens, Finance Minister Vitor Gaspar said on February 20. He estimated the gross domestic product forecast for 2013 may be revised lower by about 1 percentage point during a review of the aid programme that began on February 25. The government’s last estimate was for GDP to contract 1 per cent in 2013 before expanding 0.8 per cent in 2014.
Portugal’s official lenders are likely to adjust the nation’s “fiscal consolidation path to allow for weaker-than previously-assumed economic performance”, S&P said. “In our opinion, this makes Portugal’s adjustment process more sustainable, both economically and socially, and reduces the risk that it will not comply with the programme.”
S&P press release (S&P membership required)