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AKIPRESS.COM - Standard & Poor's Ratings Services on Friday upgraded Spain's sovereign-debt ratings by one notch, citing improved growth prospects for one of the euro zone's hardest-hit economies, the S&P said.
The upgrade, to BBB/A-2 from BBB-/A-3, pushed the ratings to two notches above junk status. S&P said its outlook for Spain is stable and reflects its view of "improving economic growth and competitiveness as a result of Spain's structural reform efforts since 2010, including the 2012 labor reforms."
The ratings firm raised its average real gross-domestic-product growth projections for the country to 1.6% from 1.2% for 2014-16--roughly in line with recent government growth forecasts.
Spain's economy is coming out of a six-year downturn, having grown for three successive quarters. In the first quarter, annualized growth reached 1.6% according to Eurostat.
But significant imbalances remain in the economy. Its government debt load is rising fast because of a large budget deficit, unemployment has jumped above 25% after tens of thousands of companies closed during the crisis, and house prices have plunged.
S&P said a gradual recovery in employment would contribute to improve Spain's fiscal position and stem the rise of bad debts in the banking system. It pointed to export growth as a driver of growth, but cautioned that "the still very high debt levels in the economy will probably lead to an extended period of relatively subdued domestic demand as companies and households attempt to reduce leverage."
Should inflation remain at the extremely low levels of the last six months for extended periods, the deleveraging process might take longer still, the ratings firm added.
Following Friday's upgrade, S&P has the same rating on Spain as Moody's Investors Service--which upgraded Spain in February and has a positive outlook on its debt. Fitch Ratings upgraded Spain last month to triple-B-plus from triple-B, putting it a notch above the other two agencies.