Moodys Investors Service has issued a two-notch downgrade to the credit rating for Portuguese government debt, fueling concerns that the debt-burdened country will have to seek international aid, according to Financial Times. On Tuesday, Moodys announced that it had lowered its long-term bond rating for Portugal two notches from A1 to A3 on subdued growth prospects over the medium term, and the agency also added a negative outlook.
The move comes as Portugal auctions up to 1 billion in one-year bonds on the heels of unveiling a fresh wave of austerity measures aimed and boosting confidence in the countrys ability to meet its financing needs. The government aims to cut the deficit to 4.6% of gross domestic product this year from 7%, before reaching 3% in 2012 and 2% the following year. However, the central bank has forecast that the economy will contract by 1.3% during 2011, marking the second recession in three years.