Portugal's debt rating downgraded

16 March 2011

Portugal's debt rating has been cut by Moody's Investors Service.

The body has downgraded the figure from A1 to A3 after concerns over a weaker outlook for economic growth, possible recapitalizing of banks and risks to the government's deficit-reduction proposals.

Moody's described the outlook on the grade as negative and said the challenge for Portugal may be exacerbated following higher interest rates being set by the European Central Bank.

It noted gross domestic product is expected to decline this year, while 2012 will only witness a weak recovery at best.

"The government faces significant challenges, not least a less supportive economic environment," the service observed, adding the government is implementing the biggest spending cuts in over three decades to improve investor confidence.

European Union leaders recently broadened their bailout plans to help resolve Europe's debt crisis by striking out a pact that will see the rescue fund expanded in both its size and scope.

By Asim Shah

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development