Ratings agency Fitch has upgraded Portugal’s sovereign debt rating from “A” to “A+”, with a “stable outlook”, the company said in a notice published on its website (source in Portuguese), keeping pace with the recent wave of confidence shown by other ratings agencies and investors in the country, according to Portugal’s Agency for Investment and Foreign Trade (AICEP). According to the Portuguese government, “all financial ratings agencies” assign Portugal an “A” rating.
In August, Standard & Poor’s (S&P) (source in Portuguese) confirmed its unsolicited sovereign credit ratings for Portugal of “A+/A-1” for long- and short-term foreign and local currency debt, and maintained the positive outlook. Morningstar DBRS also confirmed, in July 2025 (source in Portuguese), the Republic of Portugal’s rating at “A” (high), with a “stable outlook”.
Fitch Ratings’ announcement on Friday is based on the strengthening of Portugal’s public finances, in particular the projected reduction in debt and more robust economic growth than in other countries, underpinned by a “strong political commitment to fiscal prudence”.
“The upgrade reflects the strengthening of Portugal’s public finances, including a projected path of declining public debt and budget balances that are considerably stronger than those of comparable countries, supported by a strong political commitment to fiscal prudence,” Fitch says.
According to the agency, Portugal’s ratings are supported by governance indicators above the median for countries rated “A”, as well as institutional strengths linked to membership of the European Union and the euro area. These factors are, however, offset by still-high levels of accumulated public and external debt.
Fitch adds that the “prudence” of policies, repeatedly better-than-expected budget performance and persistent current-account surpluses have strengthened the resilience of the Portuguese economy and its ability to “absorb shocks”.
The agency expects public debt to fall from 89.7% of GDP in 2025 to 87.0% in 2026 and 82.9% in 2028, supported by the maintenance of primary surpluses and moderate nominal growth. Even so, the ratio is expected to remain above the forecast median of 59.5% of GDP for countries rated “A”.
On Thursday, the Minister of State and Finance, Joaquim Miranda Sarmento, said that the fall in the debt-to-GDP ratio “is the result of the work of families and businesses in recent years (source in Portuguese)“, stressing that this process “cannot be interrupted and that it is necessary to maintain the pace of public debt reduction”. Joaquim Sarmento added that it is necessary “to sharply reduce bureaucracy, which stifles companies and citizens and limits and delays private investment, especially foreign direct investment”, which will have “a strong impact on our country’s potential GDP”, he said.
On X, the finance minister hailed the “excellent news for Portugal, which regains an A+ rating for the first time since March 2011”.
This morning, the President of the Republic also welcomed the agency’s rating decision. “This is excellent news for the country and an important external recognition of Portugal’s performance, the result of a medium- and long-term evolution, sustained by the efforts of the Portuguese people and by a responsible orientation maintained under different governments,” António José Seguro writes on the Presidency website (source in Portuguese). “A better rating will improve financing conditions for the state, businesses and families, support investment and job creation and allow more public resources to be directed towards people’s needs,” the president hopes.
“When the year 2026 comes to be read in retrospect, this will surely be one of its most relevant economic news stories,” Seguro adds.
Increase in defence spending puts public finances under pressure
Fitch estimates that the budget surplus will fall from 0.7% of GDP in 2025 to 0.1% in 2026, affected by emergency support and reconstruction spending related to storms, by the tax-cut and housing measures set out in the 2026 State Budget, by peak investment linked to the loan component of the Recovery and Resilience Plan (RRP) and by higher spending on wages and pensions.
These effects are expected to be partially offset by higher social contributions, linked to continued employment growth, and by a significant dividend distribution from Caixa Geral de Depósitos, according to the agency.
For 2027 and 2028, Fitch forecasts an average deficit of around 0.4% of GDP. The agency anticipates that demographic ageing and lower migration “will increase spending and put pressure on social contributions”, although it notes that the Social Security Financial Stabilisation Fund, with assets equivalent to 13.9% of GDP at the end of 2025, “provides a substantial safety margin”.
The cost of housing is also a concern, although the rapid rise in house prices has not yet translated into “significant short-term macro-financial risks”; it may “increase vulnerabilities in the property market and is aggravating pressures on affordability”, the agency stresses.
In the first quarter of 2026, residential property prices were about 99% above the level recorded in the fourth quarter of 2019, compared with 31% in the euro area.
Low housing supply and strong demand, linked to high immigration, suggest that pressures in the property market are mainly “structural, limiting the likelihood of a sharp correction in the short term”, says Fitch, which suggests that “a solid banking sector should help contain the financial risks related to the property market” and the resulting build-up of household debt.
Another factor to bear in mind is NATO’s target of reaching 5% of GDP in defence spending by 2035, which Fitch expects will “add pressure to public finances in the medium term”. Even so, the international ratings agency considers that the track record of budgetary policy, relatively stable over successive changes of government, mitigates the risks associated with greater political uncertainty.