Market Watch
Morningstar DBRS Upgrades Republic of Portugal to A (high), Changes Trend to Stable
On January 17, 2025, DBRS Ratings GmbH (Morningstar DBRS) upgraded Portugal’s long-term foreign and local currency issuer ratings to A (high) from A. Short-term ratings were also elevated to R-1 (middle) from R-1 (low), with a stable outlook replacing the previous positive trend. This decision reflects Portugal’s robust fiscal performance, significant public debt reduction, and strengthened economic and financial resilience.
Investors in bonds, real estate, and equities will likely benefit from reduced risk premiums and higher confidence in Portugal’s economic fundamentals. Additionally, the enhanced credit profile may increase foreign direct investment (FDI) as international investors seek stable returns in the euro area.
The DBRS rating upgrade marks an important moment for the Portugal Golden Income Fund, as it underscores the country's improved financial stability and strengthens its appeal to international investors. This positive shift aligns with the Fund's strategy of providing reliable and stable returns in a robust market, enhancing its potential for both growth and security. 3 Comma Capital is excited about this development, as it reflects both the solid fundamentals of Portugal’s economy and the strategic foresight behind the Portugal Golden Income Fund, positioning it for continued success in an increasingly favorable investment climate.
Link to the news here.
Implications for Investments
The credit upgrade reinforces Portugal’s position as a reliable destination for investments. Key factors supporting this view include:1. Reduced Public Debt: Portugal’s public debt ratio declined from 116.1% of GDP in 2019 to 97.9% in 2023 and is projected to fall below 90% within two to three years. This downward trend strengthens investor confidence by reducing the country’s financial vulnerability.
2. Stable Fiscal Environment: The government’s commitment to fiscal surpluses ensures sustainable economic management, further enhancing investor sentiment. Portugal recorded a budgetary surplus of 1.2% of GDP in 2023, among the highest in the euro area, and small surpluses are projected for 2024 and 2025.
3. Resilient Banking Sector: The Portuguese banking system has demonstrated remarkable stability, with nonperforming loans declining to 2.4% in Q3 2024, well below the crisis-era peaks. Improved liquidity and profitability reduce systemic risks and create a more attractive environment for financial market participants.
Investors in bonds, real estate, and equities will likely benefit from reduced risk premiums and higher confidence in Portugal’s economic fundamentals. Additionally, the enhanced credit profile may increase foreign direct investment (FDI) as international investors seek stable returns in the euro area.
Implications for the Golden Visa Program
Portugal’s Golden Visa program, which offers residency in exchange for qualifying investments, is poised to gain further appeal following the credit upgrade. Key implications include:i) Increased Trust in Sovereign Stability: The A (high) rating underscores Portugal’s fiscal discipline and economic resilience, making it a more attractive destination for high-net-worth individuals seeking long-term residency or citizenship options.
ii) Enhanced Economic Prospects for Applicants: The improved macroeconomic environment, driven by stronger GDP growth and sustainable fiscal policies, ensures a favorable setting for business and employment opportunities for investors and their families.
iii) The DBRS rating upgrade of Portugal to A (high) presents an exciting opportunity for 3 Comma Capital’s Portugal Golden Income Fund. This positive development reflects the nation's improved economic outlook and reduced sovereign risk, enhancing the appeal of investments tied to Portuguese assets. As a result, the Fund is positioned to attract more investors seeking stable, long-term returns within a solid and resilient market.
For clients considering the Golden Visa program, this upgrade strengthens the attractiveness of Portugal as a destination for investment, reinforcing the country's financial stability and fostering greater confidence in its economic future. The Portugal Golden Income Fund, composed mainly of investment-grade or equivalent Portuguese bond issuers, is backed by Portugal's growing economic strength, and offers an even more compelling investment proposition for those looking to maximize both their financial returns and the benefits of the Golden Visa program.
For clients considering the Golden Visa program, this upgrade strengthens the attractiveness of Portugal as a destination for investment, reinforcing the country's financial stability and fostering greater confidence in its economic future. The Portugal Golden Income Fund, composed mainly of investment-grade or equivalent Portuguese bond issuers, is backed by Portugal's growing economic strength, and offers an even more compelling investment proposition for those looking to maximize both their financial returns and the benefits of the Golden Visa program.
Broader Economic Impact
The credit upgrade reflects Portugal’s successful trajectory of economic reform and fiscal prudence. Its implications extend beyond investments and the immigration program:1. Strengthened Economic Resilience: Portugal’s ability to navigate global challenges, such as geopolitical uncertainties and fluctuating interest rates, has been bolstered by its improved fiscal and external accounts.
2. Tourism and Export Growth: The strong recovery in tourism and export diversification enhances Portugal’s balance of payments, reducing external vulnerabilities and supporting sustainable growth.
3. Improved Competitiveness: Structural improvements, such as increased adoption of renewable energy and higher labor market participation, position Portugal as a leader in sustainable economic practices.
4. EU Leadership and Influence: Portugal’s fiscal discipline and economic success further solidify its standing within the European Union, potentially amplifying its voice in shaping regional economic policies.
Conclusion
Portugal’s credit rating upgrade to A (high) reflects its remarkable fiscal and economic progress, offering opportunities for investors, Golden Visa applicants, and businesses. With a stable macroeconomic environment, resilient banking sector, and promising growth prospects, Portugal is not only a stronger player in the euro area but also a globally attractive destination for investment and immigration. This milestone is a testament to the country’s commitment to sustainable growth and prudent economic governance, laying a robust foundation for long-term prosperity.The DBRS rating upgrade marks an important moment for the Portugal Golden Income Fund, as it underscores the country's improved financial stability and strengthens its appeal to international investors. This positive shift aligns with the Fund's strategy of providing reliable and stable returns in a robust market, enhancing its potential for both growth and security. 3 Comma Capital is excited about this development, as it reflects both the solid fundamentals of Portugal’s economy and the strategic foresight behind the Portugal Golden Income Fund, positioning it for continued success in an increasingly favorable investment climate.
Link to the news here.
 |
Duarte Caldas
Investments Principal
|
With more than 20 years of experience in financial markets, Duarte specialized in the energy area in the last decade, where he had the opportunity to work with the main European Power and Gas institutions at CIMD Group. Previously, he worked as Market Strategist at IG Markets Iberia.
