WASHINGTON: Fitch ratings agency on Friday upgraded Spain’s sovereign debt rating, pointing to the country’s growing economy and improving fiscal health.

The economic impact of the Catalonia region’s effort to declare independence last month have been “limited” so far but the political standoff will weigh on growth, the agency said.

Fitch raised Spain’s long-term debt rating one notch to “A-” with a stable outlook.

The country was downgraded in 2012 by all major ratings agencies amid fears Madrid could require a bailout due to the weakness of its banks.

Fitch said Friday that Spain was enjoying the fruits of an economic recovery, with the economy likely having expanded by an average of 3.3 per cent between 2015 and 2017.

“Events around the Catalonia government’s declaration of independence have underscored political risk but the economic impact has so far been limited,” the agency said.

Catalonia accounts for 20pc of Spanish GDP and growth there is estimated to have slowed by 0.2-0.7pc in the fourth quarter of 2017.

The central government deficit is likely to hit its 3.1pc target this year, down from 4.5pc in 2016. The unemployment rate in November was down two percentage points from a year earlier to 16.7pc.

Since 2015, banking sector debt has fallen 25 percentage points to 159.9pc of GDP.

“The Spanish banking sector’s overall credit fundamentals have steadily improved over the last two years,” Fitch said, noting that the share of non-performing loans and foreclosed assets were still elevated but had fallen from 11 percent to 10 percent in the year ending in June.

S&P Global Ratings on Friday raised the rating on Greek government debt by a notch citing the improved outlook for the crisis-stricken country’s finances and economic growth.

The rating on Athens’ long-term debt was improved to “B” from “B-” with a positive outlook, which means the ratings agency could raise the grade further in the next year.

“The upgrade reflects Greece’s steadily improving general government finances and its gradually recovering economic prospects,” S&P said in a statement.

The agency notes the government had budget surpluses in 2016 and 2017 and “the economy exited a multiyear recession last year.” S&P projects Greece will see its economy grow 2pc this year.

Published in Dawn, January 21st, 2018