KBRA Affirms A-/K1 Ratings for the Kingdom of Spain; Stable Outlook
10 Nov 2023 | Dublin
KBRA Europe (KBRA) affirms the Kingdom of Spain’s long-term issuer ratings of A-. KBRA also affirms the short-term issuer ratings of K1. The Outlook on the long-term ratings is Stable.
| This credit rating is an unsolicited credit rating | |
|---|---|
| With Rated Entity or Related Third-Party Participation | Yes |
| With Access to Internal Documents | No |
| With Access to Management | Yes |
KBRA’s affirmation of the ratings reflects Spain’s enhanced economic resiliency since the European debt crisis, driven by competitiveness gains, public sector reforms, increased importance of exports and widespread private sector deleveraging, that underpins solid post-pandemic growth, although KBRA notes that it has been uneven across sectors and regions. In particular, Spain’s vital tourism industry has taken three years to fully recover to pre-pandemic level and could potentially be impacted by lower global demand over the medium term. Spain’s large public debt burden and slow fiscal consolidation post the European debt crisis have been a rating constraint, and the pandemic has contributed to a large-scale deterioration in fiscal metrics. The Stable Outlook balances this deterioration against the government’s commitment to fiscal consolidation and structural reforms. European Union recovery funds support the fiscal costs and should help to put the economy on a path towards improved longer-term fiscal health, although government debt ratios will remain elevated over the medium term. The Outlook also considers relative resilience to the energy crisis, as well as inflationary pressures and monetary policy that weigh on economic growth and public finances.
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