The credit rating agency Fitch Ratings has taken advantage of the review of the risk rating level of Spanish debt, which it has maintained at A- with a stable outlook -which is equivalent to the third level of solvency on the firm's scale, two steps per above investments considered to be risky - to poke the Spanish government at the high levels of public debt and deficit and to warn it of the possibility of future downward revisions if it does not formulate a credible fiscal adjustment plan in the coming months .
Fitch bases its decision to maintain the sovereign rating of Spanish debt among reliable countries, although exposed to possible unexpected turns in the economic situation, in its perception that it is "an economy with high added value" and that it also presents " solid governance indicators", but has warned that the high levels of public debt "limit ratings" even though the expected strong growth of nominal GDP -thanks above all to the very high levels of inflation- is going to translate into a reduction short-term debt-to-GDP ratio.
The agency stresses that it needs more to improve the credit rating of Spanish debt. He explains, in this sense, that the level of public debt that Spain carries is more than double that of the average of the countries that Fitch rates with a level of A and that the data released in recent weeks show a rapid increase in of the return that is required of Spanish debt in the market, even though the differential with Germany is not widening, a phenomenon that has been attenuated thanks to the intervention of the ECB.
The agency's projections point to the Spanish public debt stagnating at 112% of GDP in the 2024-2026 period. "Greater fiscal consolidation efforts will probably be necessary to place the Spanish debt on a firm reduction path," says the agency's report, released late on Friday.
Fitch warns that any delay or circumvention of the definition of a "credible" fiscal adjustment path that guarantees a reduction in the levels of debt and public deficit in the medium and long term will be considered by the agency as an indication of the need for downgrade the Spanish debt rating.
On the other hand, the agency foresees “a forecast of a real GDP increase of 4.4% this year, which represents a marked downward revision” of the forecast of 6.3% made in 2021. “We foresee a growth of GDP of 3.3% for the whole year, which implies that real GDP will not reach its pre-pandemic level until the third quarter of 2023," the agency stresses in its statement, reports Ep.