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UPDATE 2-S&P revises Spain's outlook to negative on rising fiscal challenges

(Adds Moody’s assessment)

Sept 18 (Reuters) - Ratings agency S&P Global Ratings on Friday revised Spain’s outlook to “negative” from “stable”, saying its policy response to rising economic and fiscal challenges are at risk from political fragmentation and reform fatigue.

The agency cited the possibility that a budget will not be passed and economic weakness could persist into 2021 and 2022 in Spain. (bit.ly/32G7gbQ) It, however, maintained rating of Spain at 'A/A-1'.

“We believe that the resulting economic pressures on Spain may have increased prospects of a political agreement this autumn for a 2021 budget, while building consensus behind the pro-growth reforms detailed in Spain’s National Reform Program,” S&P said.

“Nevertheless, given the possibility that a budget may not be passed and economic weakness could persist into 2021 and 2022, we are revising our outlook on Spain to negative from stable while affirming ‘A/A-1’ long and short-term sovereign credit ratings.”

Peer agency Moody’s affirmed its rating on Spain at ‘Baa1’ and maintained outlook at ‘stable’, saying that government support measures, past progress in restoring competitiveness and reducing macro imbalances should provide for a robust economic recovery next year. (Reporting by Bhanvi Satija in Bengaluru; Additional reporting by Graham Keeley in Spain and Bhanvi Satija in Bengaluru; Editing by Arun Koyyur and Diane Craft)

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