From “junk” to “A”: Portugal’s credit transformation and what it means for investors
Portugal has reached a turning point in its financial credibility. Once considered a “junk” borrower during the sovereign debt crisis, the country is now rated “A” by all the main international credit rating agencies. Standard & Poor’s recently went a step further, upgrading Portugal to A+, placing it above Spain and Italy for the first time in decades.
This remarkable recovery is more than a symbolic victory. It has direct consequences for investors, businesses and the country’s economic prospects.
The road to recovery
The credit upgrade is the result of years of consistent fiscal effort:
- Debt reduction – Public debt has been steadily brought down, with Portugal using budget surpluses to cut liabilities rather than expand spending.
- Balanced budgets – Consecutive surpluses sent a clear message of discipline to international markets.
- Economic resilience – Despite global uncertainty, Portugal has managed to keep growth stable, attract foreign investment, and diversify its economy.
This track record reassures investors that Portugal is not only recovering but consolidating its position as a credible and responsible member of the eurozone.
Why the upgrade matters
A stronger credit rating is more than just recognition from financial agencies. It produces tangible effects for both the public and private sectors:
- Cheaper financing
- A higher rating reduces the risk premium on Portuguese debt.
- The State can borrow at lower interest rates, which often translates into improved financing conditions for local companies as well.
- Increased investor confidence
- Global funds and institutional investors that once excluded Portugal due to its “junk” status can now consider it within their investment mandates.
- This widens the pool of capital available for businesses and infrastructure projects.
- Competitive advantage in Southern Europe
- Portugal now enjoys a better rating than Spain and Italy, improving its relative attractiveness within the EU.
- This strengthens Portugal’s case as a stable entry point for international companies expanding in Europe.
Opportunities for businesses and foreign investors
The upgrade creates an environment of greater predictability and reduced risk, which is particularly valuable for international entrepreneurs and multinational companies considering operations in Portugal.
- Stable framework for long-term planning – Companies can make investment decisions with more confidence in the country’s fiscal outlook.
- Access to EU incentives – Combined with the Recovery and Resilience Plan, the improved rating supports ongoing investment in digitalisation, energy transition and infrastructure.
- Reinforced reputation – A country with a solid credit standing is more attractive to employees, partners and clients who seek security and trust.
What comes next
Maintaining this momentum will require continued discipline and forward-looking policies. Challenges remain, such as ensuring sustainable growth, managing demographic pressures, and promoting innovation.
But the trajectory is clear: Portugal has moved from a position of fragility to one of strength. For foreign investors, the message is simple, Portugal is not just a safe bet, it is becoming a strategic hub for long-term growth in Europe.
