S&P raises Spain's rating outlook to stable; Netherlands loses AAA rating
2013-11-29 11:11:04
Standard & Poor's upgraded Spain's rating outlook on Friday citing the improvement in external positions and credit metrics, while cut the rating of the Netherlands from 'AAA' on weaker growth prospects.
The agency also lifted the credit rating of Cyprus to 'B-' from 'CCC+', saying the immediate risks to full and timely payment of debt services have receded.
According to S&P, Spain's external position is improving with gradual resumption of economic growth. Moreover, credit metrics are stabilizing due to budgetary and structural reforms, coupled with supportive Eurozone polices.
Therefore, the outlook on Spain was raised to 'Stable' from 'Negative'. S&P sees less than a one-in-three probability of the rating moving up or down over the next two years.
Also, the confirmation of the rating at 'BBB-' subsided fears of a downgrade to junk status.
S&P expects Spain to recover slowly next year on the back of robust exports despite the weakness in domestic demand and high unemployment.
The rating estimates 0.8 percent growth next year. In addition, the agency said the reduction in the Spanish budget deficit will accelerate in 2015 and 2016.
Meanwhile, the Netherlands lost its coveted 'AAA' rating from S&P. Consequently, only Germany, Finland and Luxembourg possess the top notch rating in the currency bloc. The agency assigned 'Stable' outlook to the Dutch rating.
The triple A rating of the Netherlands was lowered to 'AA+' as growth prospects of the nation turned weaker than previously anticipated and the real GDP per capita trend growth rate remained persistently below that of peers.
Dutch GDP growth is expected to rise 0.5 percent in 2014 and to accelerate slowly to 1.5 percent by 2016, S&P said. The external accounts of the Netherlands support the ratings, it said. The current account surplus is forecast to increase to an average of 10 percent of GDP in 2013-16.
S&P sees more challenges to the Dutch government, going forward, in meeting its fiscal targets. However, the policy consensus in favor of containing public debt and deficits will be maintained, the agency said.
The firm today affirmed Cyprus' rating outlook at stable. The previous rating action was on July 3, when the credit rating was lifted to 'CCC+' from 'Selective Default'.
S&P believes that the Cypriot government will continue to timely comply with the program recommendations it has agreed with the Troika. But there are potential upside risks to the government's credit profile.
Earlier this month, S&P lowered France's rating by one notch to 'AA' from 'AA+', saying that the government's economic policies have failed to improve the country's growth prospects.