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Spain Rating Raised by S&P Citing Growth, Fiscal Consolidation

Jeannette Neumann and Hari Govind

(Bloomberg) -- Spain’s credit rating was raised by S&P Global Ratings, which cited the nation’s balanced economic growth, improving budgetary position and prospects for continued fiscal consolidation.

The long-term sovereign credit ratings on Spain was upgraded to A from A-, S&P said in a report on Friday. The outlook on the rating was changed to stable from positive.

“The upgrade reflects the country’s resilient economic performance, despite the protracted political stalemate and a slowdown in the eurozone,” S&P said. “Balanced economic growth and an improving budgetary position have put Spain’s government debt-to-GDP ratio on a firmer downward trajectory.”

The rating decision comes as the outlook for the robust economy -- and that of the broader European economy -- points to slower growth.

While Spain’s expansion continues to outpace that of other major euro-area economies, it’s flagging more than analysts had forecast at the beginning of the year. S&P said on Friday the economy will expand by 2.2% in 2019, decelerating over 2020-2022 as private consumption eases, and demand from key trading partners softens.

On Monday, Spain’s national statistics agency announced the results of a periodic review and lowered 2018 expansion to 2.4% from the 2.6% the agency had initially calculated.

Spain’s central bank plans to update its forecasts on Tuesday.

S&P projects Spain will post a budget deficit of about 2% in 2019, mainly because of cyclical factors, compared with 2.5% of GDP in 2018. The current account surplus will weaken in 2019 as a result of lower external demand and solid domestic demand, it said.

S&P’s review comes more than a year after the credit-rating firm upgraded Spain, lifting the country’s debt back into an A-grade classification for the first time since early 2012.

Credit-rating firm DBRS Ratings also took action on Friday, changing Spain’s outlook to positive from stable while affirming its A rating.

“Despite showing signs of deceleration, DBRS expects the Spanish economy to continue to grow at a healthy pace and outperform the euro area average growth in 2019-2020,” according to the DBRS statement.

To contact the reporters on this story: Jeannette Neumann in Madrid at jneumann25@bloomberg.net;Hari Govind in San Francisco at hgovind@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Charles Penty, Chiara Vasarri

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