After several intense weeks in the rating market, Moody's and Fitch have upgraded Spain's sovereign rating by one notch.The decisions place the State's debt at rank A and with stable outlook, consolidating the movement that S&P Global had already initiated in the middle of the month.
The agencies attribute the change to a more balanced and resilient economy, supported by growth above the eurozone average, the labor market strength and a more robust financial system. The message to investors is clear: greater confidence and better financing conditions.
What Moody's and Fitch have decided
Moody's raises Spain's rating from Baa1 to A3, the highest level since 2012, and sets the outlook at stable (previously positive). On its scale, A3 is located at seventh step of investment grade.
Fitch, for its part, raises the rating from A- to A and maintains a stable outlook after having improved the bias to positive in 2024. This is the first upward revision of its rating for Spain since 2018.
These improvements complete the movement initiated by S&P, which raised its rating two weeks ago. from A to A+ with stable outlookWith this, Spain once again has an 'A' in the big three agencies.
The relative positioning is also noteworthy: in the middle of the month, Fitch downgraded France from AA- to A, highlighting divergences in political stability and public accounts within the eurozone.
Why the grade goes up
The three rating agencies agree that the Spanish economy has surprised on the upside. They cite a more balanced growth model, progress in employment and a healthy banking sector that strengthens the resilience to shocks external
Among the supports of the cycle, the following stand out: positive net migration flows and incentives to prolong working life, factors that alleviate the supply restrictions. In addition, the increased penetration of renewable energy and macroeconomic stability provide additional traction.
Fitch focuses on the foreign competitiveness thanks to productivity gains, wage moderation and lower energy costs, along with strong and diversified services exports. It also emphasizes the limited exposure to US tariffs and the external deleveraging in progress.
In terms of forecasts, Fitch raises the expected GDP to 2,7% in 2025 and 2,0% in 2026, in line with the Government's update (2,7% in 2025 and 2,2% in 2026, with 2,1% for 2027-2028). Organizations such as the OECD and the IMF are targeting rates of 2026 between 2,0% and 2,5%.
Moody's also forecasts a path of gradual debt reduction public if the growth rate is maintained, with the debt ratio approaching the around 100% of GDP in the medium term.
Effects on financing and markets
The rating jump sends a favorable signal to international investors and may reduce the cost of the new Treasury issues. The quality seal in 'A' strengthens demand at auctions and improves the risk perception.
On the Moody's scale, Spanish debt moves from a level 'satisfactory' to 'good' within investment grade, which facilitates more competitive access to wholesale markets.
Following the S&P upgrade, the risk premium came to be situated below 55 basis points, levels not seen in almost two decades. The dynamics of rates and spreads will depend, however, on the tax execution and the European cycle.
The drag effect could extend to the private credit: a more favorable perception of the sovereign tends to be transferred to lower financing costs for companies and entities.
The challenges that remain on the table
Agencies warn that the demographic aging will continue to hamper potential growth (Moody's places it at around 1,5%-1,6%). Pension reforms—including the incentive and penalty scheme—have raised the effective retirement age, but the medium-term pressure persists.
At the institutional level, they point to a greater political fragmentation and the difficulties of the Executive to articulate stable majorities, something that increases the use of decrees and can generate investment uncertainty.
Fitch adds risks from parliamentary deadlock and political noise, as well as the need for a credible fiscal consolidation. The spending on pensions and defense will limit budgetary margins.
Moody's had warned this year of the possible effect of the forgiveness of regional debt (some 85.000 million) on credit quality; despite this, it now improves the rating and sets a stable outlook, stressing that the central scenario remains one of resilience.
The progress in the debt reduction will depend on shocks not materializing and maintaining solid growth. deterioration of the deficit or the external balance could slow, or even reverse, the trend.
With the triple improvement From S&P, Moody's and Fitch, Spain regains a symbolic place in the club of economies with 'A' ratingThe combination of above-average growth, a strong labor market, and a healthy financial system explains the change, while demographics, governance, and fiscal balance will determine whether this improvement is consolidated and translated into a sustained decline in financing costs.
