Ratings agency Fitch has upgraded Portugal's sovereign debt rating from "A" to "A+", with a stable outlook, in a move that underscores the country's improving fiscal position and economic resilience. The announcement, made on Friday, brings Portugal in line with the recent positive assessments from other major ratings agencies and reflects a broader wave of confidence among investors.
The upgrade is based on a strengthening of Portugal's public finances, particularly the projected decline in public debt and budget balances that are considerably stronger than those of comparable countries. Fitch noted that this is supported by a "strong political commitment to fiscal prudence," a factor that has been repeatedly demonstrated through better-than-expected budget performance and persistent current-account surpluses.
"The upgrade reflects the strengthening of Portugal's public finances, including a projected path of declining public debt and budget balances that are considerably stronger than those of comparable countries, supported by a strong political commitment to fiscal prudence," Fitch said in its note.
Portugal's ratings are also underpinned by governance indicators that sit above the median for countries rated "A", as well as the institutional strengths that come with membership of the European Union and the euro area. However, Fitch cautioned that these positive factors are offset by still-high levels of accumulated public and external debt.
Debt trajectory and fiscal outlook
Fitch projects that Portugal's public debt will fall from 89.7% of GDP in 2025 to 87.0% in 2026 and further to 82.9% by 2028, supported by primary surpluses and moderate nominal growth. Even so, the debt ratio is expected to remain above the forecast median of 59.5% of GDP for countries rated "A".
The agency estimates that the budget surplus will decline from 0.7% of GDP in 2025 to 0.1% in 2026, reflecting emergency spending related to recent storms, tax cuts and housing measures in the 2026 state budget, peak investment from the Recovery and Resilience Plan, and higher spending on wages and pensions. These pressures are expected to be partially offset by higher social contributions from continued employment growth and a significant dividend from state-owned bank Caixa Geral de Depósitos.
For 2027 and 2028, Fitch forecasts an average deficit of around 0.4% of GDP. The agency also warned that demographic ageing and lower migration could increase spending and put pressure on social contributions, though it noted that the Social Security Financial Stabilisation Fund, with assets equivalent to 13.9% of GDP at the end of 2025, provides a substantial safety margin.
Political reaction and housing concerns
Portuguese Finance Minister Joaquim Miranda Sarmento welcomed the upgrade, calling it "excellent news for Portugal, which regains an A+ rating for the first time since March 2011." He stressed the importance of maintaining the pace of debt reduction and cutting bureaucracy to boost private investment, particularly foreign direct investment.
President António José Seguro also praised the decision, describing it as "excellent news for the country and an important external recognition of Portugal's performance." He added that a better rating will improve financing conditions for the state, businesses, and families, supporting investment and job creation.
Fitch also highlighted concerns about housing affordability, noting that residential property prices in the first quarter of 2026 were about 99% above their level in the fourth quarter of 2019, compared with 31% in the euro area. The agency said that low supply and strong demand, driven by high immigration, suggest the pressures are largely structural, limiting the likelihood of a sharp correction.
The upgrade comes as Portugal continues to attract attention from international investors, including in the aviation sector, with talks over a stake in TAP ongoing. The country's economic resilience is also reflected in other areas, such as the surge in electric vehicle sales and innovative recycling initiatives.
