Portuguese election outcome could delay recovery, resilience plan.

Implementation of Portugal’s Recovery and Resilience Plan could be delayed by a general election result that either force prolonged negotiations or create political instability, rating agency DBRS warned on Monday.

“The most tangible risk in the short term is a potential delay in the implementation of Portugal’s Recovery and Resilience Plan, especially if government formation drags on over time or if the next government is short-lived and triggers more elections relatively soon,” DBRS said in a comment it published about the elections set for 10 March.

In its commentary, DBRS believes the future government will not be disruptive regarding fiscal policy.

“We see limited risks to Portugal’s public debt reduction efforts in the coming years, regardless of which party leads the next government,” the analysis reads.

DBRS, therefore, does not expect “the next government, whether led by the AD [Democratic Alliance] or the Socialists, to deviate from a decade-long commitment to prudent fiscal policy and debt reduction”.

The rating agency also pointed out that the process of starting the privatisation of TAP was suspended by the fall of António Costa’s Socialist government but believes that “it will probably be restarted after the formation of a new government”.

“The reactivation of the TAP privatisation process could provide another favourable boost to the reduction of Portugal’s public debt. However, we do not expect this to materially alter the trajectory,” it said.

The agency believes that none of the parties will achieve an absolute majority in parliament, but “Chega’s rise in the opinion polls could allow it to join a right-wing coalition led by AD or to facilitate an AD minority government”.

In January, DBRS confirmed Portugal’s ‘A’ rating while maintaining a ‘stable’ outlook.

The rating is an assessment given by financial rating agencies, with a major impact on the financing of countries and companies as it assesses credit risk.

(Ânia de Ataíde – edited by Pedro Sousa Carvalho | Lusa.pt)