April 20, 2021

Moody`s moves away from the possibility of revising upwards Spain's note due to the slowdown and Catalonia

Moody`s moves away from the possibility of revising upwards Spain's note due to the slowdown and Catalonia


The rating agency Moody's has acknowledged feeling "comfortable" with the "stable" perspective assigned to the 'Baa1' rating of Spain, which moves away the possibility of an improvement in the rating in the short term, since the rating agency does not contemplate in its base scenario an acceleration of economic growth or of the reorganization of public accounts, while not appreciating a resolution to political uncertainty , particularly in the case of tensions with Catalonia.

«NOur outlook for Spain is stable and we are very comfortable with her at the moment ", said the vice president of the agency and head of sovereign analysis for Spain, Kathrin Muehlbronner during a conference in Madrid.

In his analysis of the Spanish economy, Muehlbronner has highlighted how the positive aspects growth "quite solid, higher than Europe", with a more balanced and sustainable character, including a significant gain in competitiveness, as shown by exports and the current surplus, in addition to the soundness of the banking system.

Catalonia, main risk

However, among the negative aspects, the expert has acknowledged that «First, the political situation is complicated», pointing out that at the moment there is no resolution for the problem with Catalonia.

However, Muehlbronner has identified as the most relevant problem the «Very slow progress in the reorganization of public finances», where the recent improvement is not structural, but motivated by the conjuncture of the economic cycle.

Growth slowdown

In this sense, the Moody's analyst has confirmed that the agency expects a slowdown in the growth of the Spanish economy this year, with a last forecast of expansion of 2.2%, while for 2020 the growth will be less than 2%, although Spain will continue to grow above the average of the euro zone.

In this sense, the representative of Moody`s has acknowledged that «to be more optimistic with the rating we should see an even more robust growth, which would mean that the Spanish economy has a greater resilience, something that is not part of our base scenario ».

Also, the expert has indicated that a necessary condition to see upward pressure on the rating would be see a significant improvement in the deficit, something that is not part of the base scenario managed by the agency, which considered very positive measures that were introduced to correct the pension deficit.

On the other hand, Muehlbronner has stressed that the rise in the minimum wage «Is clearly negative» in terms of job creation. "We will look very closely if the increase in the minimum wage is translated into a generalized increase in wages," the analyst added, warning that this would be more negative and would damage competitiveness, although she admitted that Spain has had a relatively low minimum wage. low compared to other advanced countries.


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