Following the downgrade to Spain’s credit rating from Fitch last week Moody’s has now downgraded Spain from Aa2 to A1, stating this was in part due to “the downside risks from a potential further escalation of the euro area crisis”. The review of Spain’s rating for possible downgrade was initiated in July. The ratings carry a negative outlook.
Some of the reasons for the downgrade include Spain’s vulnerability to market stress and “…no credible resolution of the current sovereign debt crisis.” and also the prospect of worsening finances in the Euro zone.
Moody’s now predict Spain’s real GDP growth in 2012 will be no higher than 1%, lower than the 1.8% they had previously thought.
Despite Moody’s comments the Spanish government believes the downgrade is based on the short-term problems in Europe, rather than Spain’s “long-term fundamental outlook”.
Read Moody’s full report here.