Before 2008, very few of us knew of, understood, or really cared all that much about countries’ sovereign debt rating and credit scores.
But as the credit crunch bit down hard a decade ago, suddenly every man, woman and dog on the street was told to feel trepidation at the thought of the UK losing its Triple A rating, or Italy being plunged into junk bond status, or Spain suffering downgrade after downgrade…
Suddenly it mattered. As jobs were being lost left, right and centre, any shred of good financial news was seized upon. Alas, during those lean years there was very little in the way of positive fiscal stories to take comfort in, particularly for Spain.
In 2012, four years after the financial crisis hit, and as the country was preparing to enter a double-dip recession, most of the main global ratings agencies took the painful step of downgrading Spain to a “B” rating in response to the proposed EU bailout and the precarious position of the nation’s banks.
This meant that Spain, almost overnight, began to find it much harder to borrow money, attract investors or build any sort of stable growth plan. And while the lights stayed on, it certainly was touch-and-go for a short while as the nation battled with soaring unemployment, massive brain drain, failing industry and a global financial sector wary of dealing with the nation.
Fast forward to January 2018, however, and the outlook is much, much rosier, with Fitch – one of the leading agencies – raising Spain’s long-term debt rating to “A-“, which indicates a stable outlook.
The agency stressed that Spain is currently enjoying a strong economic recovery, with GDP having grown by an average of 3.3% between 2015 and 2017, and poised for broadly similar growth again this year.
Unemployment remains high at 16.7%, but has been falling steadily for three years straight, while Spain’s central government deficit is on course to fall to 3.1% in 2018, down from 4.5% in 2016.
Crucially, the banking industry of Spain has enjoyed a very encouraging recovery, reducing its debt some 25% since 2015. “The Spanish banking sector’s overall credit fundamentals have steadily improved over the last two years,” Fitch said in its report.