S&P Raises Portugal's Credit Outlook to Positive, Signalling Further Upgrade Ahead

Standard & Poor's kept Portugal's sovereign credit rating at A+ on Friday but upgraded the outlook from "stable" to "positive" — a move widely interpreted as a precursor to yet another ratings improvement in the months ahead.

The decision caps a remarkable trajectory for Portuguese public finances. Since the pandemic peak in 2020, when net public debt reached approximately 122 per cent of GDP, Portugal has slashed that figure by nearly 40 percentage points to an estimated 85 per cent in 2025. The S&P highlighted this performance as comparing "favourably with other countries in the region, reflecting a balanced fiscal response."

This is the third positive signal from S&P in just over a year. In February 2025, the agency raised Portugal from A- to A. In August, it climbed again to A+, where it stands today. The improved outlook now suggests a further notch upward could come as early as the next scheduled review.

What Is Driving the Improvement

S&P pointed to three pillars: disciplined budget management, robust economic growth, and a continued reduction in the debt-to-GDP ratio. The agency expects Portugal to maintain this course, noting that the government's fiscal framework has remained credible despite political transitions and external shocks.

The storms that battered the country in early 2026 — Kristin, Leonardo and Marta — were acknowledged, but S&P anticipates their economic impact to be "largely localised and temporary." Reconstruction costs, while significant for affected municipalities, are not expected to derail the broader fiscal consolidation trend.

Implications for Borrowing and Investment

A higher credit rating translates directly into lower borrowing costs for the Portuguese state. For anyone holding a mortgage linked to Euribor or considering property investment, the broader signal is reassuring: Portugal's macroeconomic stability continues to strengthen, supporting the conditions for competitive lending rates and sustained property demand.

International investors and businesses evaluating Portugal as a base of operations will also note the trajectory. A stable, improving credit profile reduces country risk premiums and makes Portuguese government bonds more attractive in global markets — a feedback loop that reinforces the very fiscal health S&P is rewarding.

The next scheduled review will determine whether Portugal crosses into AA- territory, a threshold that would place the country alongside economies like the Czech Republic and Estonia in the agency's hierarchy. For a nation that required an international bailout barely a decade ago, such a milestone would represent a profound transformation.