©Reuters. Another international rating firm grants investment grade to the Generalitat
Barcelona, March 12 (.).- The Canadian agency DBRS Morningstar, one of the four major international rating firms, has placed the Generalitat’s credit rating at investment grade, as the Fitch agency did last July, therefore that the Generalitat’s debt is no longer treated as a ‘junk bond’ for both.
Catalonia did not have this credit consideration by at least two rating agencies for ten years, since 2012.
Specifically, DBRS Morningstar has raised the rating of the Generalitat one step, so that it has gone from giving it a ‘high BB’ -the highest rating within the speculative field- to a ‘low BBB’, the first step that gives entry investments considered reliable.
Although the improvement is only one step, the difference is notable, because having an investment grade facilitates the possible return of the Generalitat to the financial markets and, in addition, reduces the interest that it would have to pay to place its debt.
THE OUTPUT TO THE MARKETS, CLOSER, ACCORDING TO THE CONSELLER GIRÓ
In statements to Efe, the Generalitat’s Minister of Economy, Jaume Giró, assured that the improvement of the credit rating by this agency “is very good news that brings us a little closer to the objective of going out to the markets during this legislature, which is the normal and desirable operation for any country when it comes to financing its indebtedness”.
“This DBRS announcement, like Fitch’s last summer, shows us that Catalonia is doing the job well. The pandemic has caused a huge economic shock, but as this same agency underlines, the Catalan economy is recovering adequately and unemployment has stabilized”, added the minister.
Giró stressed that Catalonia had not had that credit rating for a decade from at least two international agencies and commented that although the State’s liquidity mechanisms -such as the FLA- are “useful and positive” instruments, they also “condition” the financial autonomy of the Generalitat.
DBRS VALUES POLITICAL DIALOGUE WITH THE GOVERNMENT
To justify the improvement of the note and place it in a stable perspective, this agency underlines, among other aspects, that the relationship between the Spanish Government and the Generalitat “has been slowly but steadily strengthened over the last three years”, and sees “very unlikely “a political escalation similar to that experienced in 2017.
“While the independence issue will remain a structural issue in the region in the medium to long term and sporadic tensions could resurface, DBRS Morningstar believes that relatively smooth economic and financial cooperation can now be expected.”
In the strictly economic field, this agency considers that although the economic outlook still presents uncertainties, due to the pandemic and inflationary pressures, Catalonia’s finances “have so far weathered the economic impact of the covid-19 pandemic relatively well” , supported by the extraordinary transfers provided by the State to the communities.