Moody's improves Catalonia's ratings outlook
Declaration of independence impact on country's GDP and industrial sector "limited," says agency
rating agency
Independent Catalonia’s economy would get an A+ rating, 7 levels better than the current one
According to a study by the Professional Association of Economists of Catalonia (Col·legi d’Economistes), an independent Catalonia would obtain a much better grade from rating agencies than it currently gets, taking into account its diversified economy and higher GDP per capita than the European average. Specifically, it would obtain an A+ rating, 7 levels higher than the current BB ‘junk bond’, using Standard&Poor’s classification. The study highlights that without the current fiscal deficit with the rest of Spain, the rating would be “at least” that of the Basque Country and would enable the Catalan Government to access the international financial markets. Catalan taxpayers pay much more to the Spanish Government than the amount they get back in terms of services and infrastructure; a fiscal deficit equivalent to between €13bn and €17.5bn per year.
Moody’s foresees a common pro-independence platform in early elections to be positive for Catalonia
The international rating agency Moody’s analyses the current political situation in Catalonia regarding the alternative consultation vote scheduled for the 9th of November and the potential early elections. Moody’s considers that early Catalan Parliament elections are the most likely scenario, emphasising the Catalan Government’s commitment to respect the legal framework. In addition, it also considers “a common platform” with which pro-independence parties would run in the elections to be the most likely outcome. On top of this, Moody’s predicts the victory of such a common platform and that Catalonia would be in a “strong” position to negotiate a better fiscal deal within the current Constitution. However, in such scenario, Moody’s does not consider independence. In this vein, Catalonia’s credit rating is likely to improve while Spain’s would worsen.
Catalonia’s independence would have “a major adverse impact on Spain’s economy” warns Moody’s
Rating agency Moody’s warns that Catalan independence from Spain might have “a major adverse impact on Spain’s economy” but also that “Catalonia itself could also suffer” if the break–up is not friendly. In a forecast about the Spanish economy published this week, the New York-based company analyses potential risks that might damage the expected economic recovery. Moody’s praise the high level of exports, based on a higher competitiveness reached by lowering salaries. However, the report, signed by Zach Witton, highlights that “debt reduction by households and businesses, elevated unemployment, the housing market correction, and tight credit will drag on growth”.
Fitch lowers Catalonia’s debt rating despite recognising the efforts to reduce the public deficit
The rating agency Fitch reduced Catalonia’s long term debt’s appreciation, going from A to A- because of the expected weak economic growth. Nevertheless, Fitch recognised the efforts to reduce the public deficit carried out by the Catalan Government. Fitch has lowered the debt rating of five Spanish Autonomous Communities and given others a negative perspective for the future. The Catalan Ministry of Finance thought that the reduction is due to “the international situation” and stressed that efforts are already made.
Moody's downgrades Catalonia's long-term rating
Catalonia and five other autonomous communities have had their long term rating downgraded whilst the Spanish state's credit rating comes under review.