Portugal Governing Performance: Overperforming Peers On Key Measures
A recent commentary by DBRS highlights Portugal’s performance during political crises. Despite facing minority parliamentary positions and recurring threats of confidence motions and early elections, the Republic of Portugal’s governments (rated A with a stable outlook by DBRS) have maintained strong governance measures.
According to the World Governance Indicators (WGI) recently updated by the World Bank/Brookings, Portugal outperforms its peers in key governance indicators.
DBRS states that Portugal has mostly outperformed eurozone countries with similar ratings since the beginning of the eurozone crisis in the 2010s. This period includes structural reforms, economic recovery, and rapid fiscal consolidation.
DBRS believes the risk of future electoral results diverting Portugal from a decade-long commitment to prudent fiscal policy and debt reduction is low.
The agency highlights Portugal’s higher rankings in governmental effectiveness and political stability compared to its EU peers. It also mentions that government support has decreased since a surprising majority victory in the last elections.
DBRS expresses concern about a potential shift in priorities regarding the current commitment to fiscal discipline. However, it considers this unlikely.
The agency states that a change in government or early elections would not necessarily lead to a deterioration in political stability or government effectiveness.
Jason Graffam, Vice President of Global Sovereign Ratings, emphasizes that the immediate challenge for the current and future governments is effectively managing EU funds for long-term investments and supporting businesses and households amidst an expected economic slowdown.