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Fitch Raises Spain's Outlook to Stable

Source: Bloomberg - Fri 1st Nov 2013
Fitch Raises Spain's Outlook to Stable

Fitch Ratings raised its outlook on Spain's rating to stable from negative, saying the nation's overhaul of banks has "advanced well" and financing conditions have improved.

The company affirmed its BBB rating, the second-lowest investment grade, Fitch said in London today. Spain has improved its "policy track record," with improvements to its labor market, pension system and budget, it said.

Spain emerged from a more than 2-year recession in Q3 and the main Ibex 35 stock index has risen about 21% this year as foreign investors return to the market. The country first lost its top credit rating at Standard & Poor's in 2009 and hasn't been upgraded by any of the 3 main rating companies since. Moody's Investors Service and S&P rate Spain one step from junk.

Fitch said the recovery from recession came sooner than it had forecast, and the adjustment from a current account deficit to surplus has been faster than expected. The economy will remain weak, growing 0.5% in 2014, it added, less than the government's 0.7% estimate.

"Medium-term growth prospects are weak, all sectors of the economy remain very indebted and unemployment is exceptionally high," Fitch said. Spain's unemployment rate was 26% in Q3.