Spain’s credit rating was raised one level to BBB at Standard & Poor’s, which boosted its economic growth forecasts for the nation.
The outlook for the rating is stable, S&P said in a statement today, after increasing the score for the first time since stripping Spain of its AAA grade in 2009. The move was from BBB-, which is one step above junk, and follows similar moves by Fitch Ratings last month and by Moody’s Investors Service in February.
Rating companies are revising their call on Spain’s ability to pay its debts after the nation this year exited the European Union bailout program it was forced into in 2012. Spain’s borrowing costs have since fallen to record lows amid a rally that has also brought investors back to Ireland, Portugal and Greece, suggesting that Europe’s debt crisis is over.
“The upgrade reflects our view of improving economic growth and competitiveness as a result of Spain’s structural reform efforts since 2010,” S&P said. “Reflecting the effects of these reforms and our expectation that monetary policy in the eurozone will remain highly accommodative, we have revised our average 2014-2016 GDP growth projections for the Spanish economy to 1.6 percent from 1.2 percent.”
Spain’s economy expanded for a third straight quarter in the three months through March, growing twice as fast as the euro region average. Prime Minister Mariano Rajoy expects growth of 1.2 percent this year and 1.8 percent in 2015, compared with a 1.2 percent contraction last year.
Spain’s Treasury yesterday auctioned five- and 10-year debt to yield less than in 2004 and 2005, when the country’s economic growth exceeded 3 percent a year and its public debt burden was less than half its current level of 94 percent.
Investors often disregard ratings companies’ credit grade and outlook changes. France’s 10-year yield, which was 3.08 percent when S&P removed its top rating in January 2012, tumbled to a record 1.659 percent in May last year.