KBRA Affirms A-/K1 Ratings for the Kingdom of Spain; Outlook Revised to Positive
8 Nov 2024 | 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 has been been revised to Positive from 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 |
The affirmation of the ratings reflects Spain’s large, advanced, institutionally strong, and diversified euro area economy, that benefits from European Central Bank and European Union (EU) support. Spain’s solid pre- and post-pandemic economic performance reflects enhanced economic resilience and sustainability since the European debt crisis, driven by competitiveness gains, public sector reforms, growth and diversification of exports, current account surpluses, and widespread private sector deleveraging. The Positive Outlook reflects Spain’s strong post-pandemic economic performance and an expectation that the sovereign will continue to grow faster than the euro area, coupled with consolidating fiscal metrics and reduced external vulnerabilities. Increased economic diversification, improving labour market trends, relative energy security and inflow of EU recovery funds, have all supported Spain’s growth profile. These factors are expected to endure over the next few years and should help bolster public finances, although government debt ratios will remain elevated over the medium term. That said, ongoing political uncertainty could delay necessary reforms and investments needed to tackle structural growth challenges. In KBRA’s view, the credit impact of the recent devastating flooding in eastern Spain remains somewhat uncertain, although the fiscal costs should be manageable.
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