SYDNEY, March 28 (Reuters) - Moody’s Investors Service on Thursday affirmed Portugal’s Ba3 rating but kept it on negative outlook, citing high government debt and the country’s vulnerability to regional shocks such as the Cyprus crisis.
The agency also noted the country’s weak economy, which was at risk of contracting by even more than first feared this year.
Still, Moody’s said Portuguese policymakers had made significant progress toward fiscal consolidation and structural reforms, and were nearer to regaining market access.
The agency said it might downgrade Portugal’s sovereign ratings in the event of a further significant rise in the government’s debt ratio or an increase in borrowing costs.
Conversely, Moody’s would consider raising the rating if the government managed to stabilise its debt-to-GDP ratio.