Research Update: Spain Outlook Revised To Negative From Stable On Mounting Fiscal and Structural Challenges; Affirmed At 'A/A-1'

The COVID-19 pandemic has hit Spain's economy hard; under our projections, the country's GDP will not return to 2019 levels until 2022. To fight the effects of COVID-19 on the economy, the government has introduced extraordinary fiscal measures that are set to widen the general government deficit to about 12% of GDP in 2020. We believe that the resulting economic pressures on Spain may have increased prospects of a political agreement this autumn for a 2021 budget, while building consensus behind the pro-growth reforms detailed in Spain's National Reform Program. Nevertheless, given the possibility that a budget will not be passed and economic weakness could persist into 2021 and 2022, we are revising our outlook on Spain to negative from

...- The COVID-19 pandemic has hit Spain's economy hard; under our projections, the country's GDP will not return to 2019 levels until 2022. - To fight the effects of COVID-19 on the economy, the government has introduced extraordinary fiscal measures that are set to widen the general government deficit to about 12% of GDP in 2020. - We believe that the resulting economic pressures on Spain may have increased prospects of a political agreement this autumn for a 2021 budget, while building consensus behind the pro-growth reforms detailed in Spain's National Reform Program. - Nevertheless, given the possibility that a budget will not be passed and economic weakness could persist into 2021 and 2022, we are revising our outlook on Spain to negative from stable while affirming our unsolicited 'A/A-1' long- and short-term sovereign credit ratings....

Research Update