Spain builds

Moody’s and Fitch Follow S&P in Upgrading Spain’s Sovereign Rating

Spain has secured rating upgrades from all three major credit agencies, as Moody’s and Fitch have raised their assessments of the country’s debt, following Standard & Poor’s (S&P).

Last Friday, Moody’s upgraded Spain from ‘Baa1’ to ‘A3’ with a positive outlook, citing the “strength of the country’s economy,” which is benefitting from more balanced growth, improvements in the labour market, and a stronger banking sector “increasing the economy’s resilience.” Fitch also upgraded Spain, moving from ‘A-‘ to ‘A’, while last year, S&P Global upgraded the country to ‘A+’.

The Spanish government welcomed the upgrades, noting that all three major agencies now place Spain at ‘A’ level or higher. “We have achieved an A rating from all agencies, a high rank, which demonstrates confidence in the solidity and prospects of our economy,” said Carlos Cuerpo, Minister of Economy, Trade and Business, on social media.

Spain’s Economic Resurgence

According to the IMF, Spain’s economic expansion will continue to outpace other eurozone countries. The Bank of Spain has raised its growth forecast for 2025 to 2.6% and improved the deficit outlook from 2.8% to 2.5%. By comparison, Spain’s public debt-to-GDP ratio stands at 103.5%, while France is at 114.1% and Italy at 137.9% (Eurostat).

Moody’s noted that employment is a key strength, driven by positive net migration and incentives to extend working life. Economic growth is also supported by Spain’s competitive advantage in renewable energy and macroeconomic stability.

Fitch emphasised strong employment rates, productivity gains, moderate wage growth, low energy costs, and diversified exports as factors strengthening the economy and private balance sheets.

Ratings serve as a gauge of a country’s economic health — indicating whether it is a reliable borrower or at risk of default. A higher rating fosters greater confidence, whereas a lower rating raises concerns about financial management.

Their primary significance lies in their direct impact on borrowing costs. Countries with strong ratings can secure financing on international markets at lower interest rates, while those with weaker ratings must pay more. Each point increase in financing costs adds billions of euros in interest, reducing room for investment in infrastructure, innovation, and the green transition.

Ratings also send an important signal to large investors. Many investment funds and banks are only permitted to invest in debt that meets a minimum rating. If a country falls below that threshold, it drops off their radar, limiting financing options.

Challenges Remain

However, challenges remain. Moody’s warns that Spain’s ageing population and institutional weaknesses, including legislative and executive fragmentation, could constrain future growth while political uncertainty and reliance on executive decrees may deter investment.