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Fitch lifts Portugal’s debt out of junk status

Portugal’s sovereign debt rating has emerged from junk status as the country moves to bring its fiscal deficit under control, the ratings agency Fitch said Friday.

In a statement, Fitch said it was raising the former bailout country’s long-term sovereign debt rating to BBB, the lowest investment-grade rating, from BB+ with a stable outlook.

In a statement, Portuguese Finance Minister Mario Centeno hailed the move, calling it a “re-evaluation on an unprecedented scale.”

“This rating reflects the path of mastering public expenditures and of an improving current accounts balance,” he said.

As a share of GDP, gross government debt will decline by three percentage points this year to below 127 percent, the first decline since the sovereign debt crisis, Fitch said, noting a “firm downward trend.”

“The favorable debt dynamics are driven by a combination of previous structural fiscal measures, the recent cyclical recovery and a substantial improvement in financing conditions,” the agency said.

The overall budget deficit was likely to shrink to 1.4 percent of GDP this year, down from two percent in 2016 — well below the 7.4 percent recorded in 2014.

Financial stability also improved with the recapitalizations of two of Portugal’s largest banks and the sale of a controlling stake in Novo Banco to a foreign investor. Non-performing loans remained a concern, however.