Spain’s Outlook Revised to Stable by Fitch

Cibeles Square in Madrid
Spain emerged from a more than two-year recession in the third quarter and the main Ibex 35 stock index has risen about 21 percent this year as foreign investors return to the market. Photographer: Angel Navarrete/Bloomberg

Fitch Ratings raised its outlook on Spain’s rating to stable from negative, saying the nation’s overhaul of banks has “advanced well” and financing conditions have improved.

The company affirmed its BBB rating in a statement in London yesterday, leaving the country at the second-lowest investment grade. Spain has improved its “policy track record,” with improvements to its labor market, pension system and budget, it said.

Spain emerged from a more than two-year recession in the third quarter and the main Ibex 35 stock index has risen about 21 percent this year as foreign investors return to the market. The country first lost its top credit rating at Standard & Poor’s in 2009 and hasn’t been upgraded by any of the three main rating companies since. Moody’s Investors Service and S&P rate Spain one step from junk.

Fitch said the recovery from recession came sooner than it had forecast, and the adjustment from a current account deficit to surplus has been faster than expected. The economy will remain weak, growing 0.5 percent in 2014, it added, less than the government’s 0.7 percent estimate.

“Medium-term growth prospects are weak, all sectors of the economy remain very indebted and unemployment is exceptionally high,” Fitch said. Spain’s unemployment rate was 26 percent in the third quarter.

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