S&P Maintains Spain’s A Rating, Revises Outlook To Negative From Stable; Moodys Makes No Changes

Time for Spain to get a foreign policySpain's rating could worsen if the government repeals past reforms

Rating agency S&P has changed Spain’s rating outlook to “negative” due to the pandemic. While maintaining the country rating at “A,” the agency warns of the coronavirus’ strong impact on Spain’s economy. For this reason it has worsened its perspectives from “stable” to “negative.”

S&P also justifies its decision on the possibility that an agreement will not be reached over next year’s budget. It identifies the main risks as high public debt, the increase in the dependency rate and the delays in the implementation of reforms to increase growth and budgetary consolidation.

It also warns that the rating could worsen if the government repeals past reforms, making reference to the Labour Reform.

In the opinion of Bankinter’s analysis team, S&P’s change in Spain’s outlook rating will have an impact on both sovereign bonds and corporate debt.

“The country has been feeling the impact of the importance of tourism on the economy. Some surges in Covid-19 outbreaks, more pronounced than in other countries, and the consequent restrictions on international tourist arrivales, have led to the cancellation of the tourist season. Employment is the key aspect and it is crucial there is no structural destruction here.”

For its part, Moodys has decided to leave its Baa1 rating for Spain unchanged, with a stable outlook. It considers that the efforts made in the past to correct macroeconomic imbalances, along with the measures introduced to date, should help towards a vigorous recovery next year. They estimate that Public Debt to GDP will stabilize around 120% in the coming years. GDP will fall 12.5% this year due to the high weighting of tourism and the number of small and medium sized companies.