In response to the coronavirus pandemic and its credit effects on companies, S&P Global Ratings has revised its long-term credit rating outlook for Spain downwards. The international credit rating agency has recently changed its forecast to "negative" from "stable", while affirming long and short-term sovereign credit ratings at 'A' and 'A-1', respectively.
The country's authorities have not been able to approve their budget plan since 2018. This fall, there is hope that it will be drawn up for 2021. However, there is still a high probability that the main financial document will not be approved again. These unclear prospects have become one of the main reasons for Spain's credit rating outlook cut. Besides, the pandemic with its disastrous consequences for the economy affects the agency's outlook. "The COVID-19 pandemic has hit Spain's economy hard; under our projections, the country's GDP won't return to 2019 levels until 2022... To fight the effects of COVID-19 on the economy, the government has introduced extraordinary fiscal measures that are set to widen the general government deficit to about 12% of GDP this year," S&P said.
In addition, there is an alternative view on the situation in the country. Moody's, another major rating agency, has affirmed Spain's credit rating at Baa1, noting the outlook remains stable. Local experts predict that the Spanish economy will contract by 12.5% this year, but it will recover sharply next year. "Government support measures combined with past progress in restoring competitiveness and reducing macro imbalances should provide for a robust economic recovery next year," Moody's pointed out.
