Europe

Europe

Moody’s downgrades Spain two notches, outlook negative

19 October 2011 03:58 (UTC +04:00)

Baku-APA. Moody’s ratings agency downgraded Spain’s government bond rating two notches, from AA2 to A1, outlook negative, the agency said, APA reports quoting RIA Novosti.

The agency said the downgrade is due to Spain’s vulnerability to market stress and event risk, moderate growth perspectives and possible problems in achieving budget consolidation targets.

Its experts believe that economic risks will remain due to the European debt crisis, even if the Spanish government manages to normalize debt markets in short-term perspective.

"Nonetheless, Moody’s points out that Spain’s new A1 rating reflects its view that the risk of default by Spain remains remote," the agency said.

The agency said the negative outlook reflects the perspectives of the country’s GDP growth.

"Moody’s is maintaining a negative outlook on Spain’s rating to reflect the downside risks from a potential further escalation of the euro area crisis," the agency said.

Moody’s now expects Spain’s real GDP growth in 2012 to be 1% at best, compared with earlier expectations of 1.8%, with risks mainly to the downside. Over the following years, the rating agency continues to expect a very moderate pace of growth of around 1.5% on average per annum.

The downgrade concludes the review for possible downgrade that Moody’s had initiated for Spain’s rating on 29 July.