(Bloomberg) -- Spain’s credit rating was raised one level at Fitch Ratings, which said the country’s “buoyant” economic growth has helped reduce the government’s general deficit.
The decision puts Spain in ‘A’ grade territory for the first time since 2012, when it was mired in a recession and a housing slump. It also marks the first upgrade for the country from a major credit-rating company in more than two years.
“Spain is continuing to benefit from a reduction in macroeconomic imbalances underpinned by a strong, relatively broad-based, economic recovery,” Fitch said in a statement.
Spanish bonds rose this week in anticipation of the Fitch move, pushing the yield advantage on 10-year debt over German bunds to its lowest since 2010. The upgrade could also trigger greater appetite for Spanish debt from buyers looking for A rated bonds.
Fitch’s announcement is an endorsement for Spain after its strong economic performance was temporarily eclipsed by political uncertainty in Catalonia late last year. The region was plunged into turbulence after an ill-fated declaration of independence from Spain that challenged the authority of Prime Minister Mariano Rajoy’s minority government.
The Catalan parliament convened this week for the first time since Rajoy dismissed the former regional administration and called a snap election in December. While separatists remain in control of key positions, investors seemed to consider that as noise in the face of Rajoy’s tough stance on the region’s rebellion.
The big unknown is whether the ousted Catalan leader Carles Puigdemont can form a government from his self-imposed exile in Belgium. Failure to do so could trigger a new vote.
The Spanish economy appears to have largely shrugged off the turmoil, and growth was probably 0.7 in the fourth quarter, according to a Bloomberg survey. In 2018, expansion is forecast to cool to 2.6 percent from 3.1 percent, though that would still be above the euro-area average.
Spain is rated BBB+ at S&P Global Ratings, which is due to give its update on March 23, and Baa2 at Moody’s Investors Service. It will give its next rating decision in April.
©2018 Bloomberg L.P.