Portugal's credit rating cut by Moody's

(News Today) - Moody's, the rating agency, downgraded Portugal by two notches on Tuesday, citing the country's deteriorating public finances.

The U.S. rating agency cut Portugal's long-term credit rating to A1 from Aa2 on concerns over its debt to gross domestic product and debt to revenue ratios, which have risen rapidly over the past two years.

The agency warned that Portugal's debt to GDP ratio will approach 90 percent, while its debt to revenue ratio will rise to 210 percent over the next two or three years.

This means Portugal will remain highly indebted while its economy struggles to recover.

Anthony Thomas, a senior analyst in Moody's sovereign risk group, said: "We remain concerned about the economy's medium-term growth potential."

The agency says a more severe deterioration in the country's debt metrics in the event of higher interest rates or weaker economic growth cannot be completely ruled out.

The euro fell against the dollar and Portuguese equity and bond markets came under pressure, as investors said Moody's announcement was a sign that the country had a long way to go in reforming and reviving its economy.

Moody's rating of A1 remains an investment grade, but is lower than that of Fitch and higher than that of Standard & Poor's.

Source : CNN

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