Fitch says won’t cut Spain again for one year

By Walter Brandimarte

NEW YORK (BestGrowthStock) – Fitch Ratings offered some relief to Spain on Friday by saying it won’t downgrade the country’s credit ratings again in the next 12 months despite an expected deterioration in public finances.

The ratings agency cut Spain’s credit rating by one notch to AA-plus from AAA on Friday, warning that economic recovery will be much slower than forecast by the government as a result of fiscal austerity measures.

The outlook on the new rating was stable, which surprised some analysts who expected a multi-notch downgrade for Spain.

“There’s some tolerance in this rating level,” Fitch analyst Brian Coulton told Reuters in an interview from London.

“There will be some deterioration in the credit profile going forward but … at this point our judgment is that we will not going to be taking the rating down further in the next year,” he added.

Fitch’s move contrasted with the decision taken one month ago by competing agency Standard & Poor’s, which downgraded Spain to AA from AA-plus, leaving a negative outlook on the rating.

“Spain should be downgraded multiple notches,” Win Thin, a senior currency strategist with Brown Brothers Harriman, said in a note to clients.

“Believe it or not, Moody’s still has Spain as a AAA credit. We don’t think that can last and we stress again that we see multiple downgrades ahead for Spain,” he added.

Moody’s was not immediately available to comment on Spain.

Fitch’s Coulton said, however, that Spain’s debt levels at just under 55 percent of GDP “are low by international standards.”

He added that the government has been fiscally responsible, putting together a strong fiscal response to counter a revenue slump.

The economic sluggishness exacerbated by those austerity measures will be Spain’s main challenge going forward, however.

Fitch forecasts the country’s economy will shrink 4.5 percent this year and then expand a modest 0.5 percent in 2011. Growth should then remain within a range of 1.5 percent to 2.0 percent in the medium term, Coulton said.

“Economic risk is clearly a key concern for the rating,” he said. “There could be further significant news on that side.”

Also on Fitch’s radar are the risks associated to the implementation of the fiscal measures, which face opposition in the country.

Stock Today

(Editing by Chizu Nomiyama)

Fitch says won’t cut Spain again for one year