MOODYS RAISES PORTUGAL GOVT BOND RATING ONE NOTCH TO Ba2 from Ba3; places rating on review for further upgrade - The rating action was triggered by the following key factors: 1) Portugal's fiscal situation has improved more rapidly than initially targeted and the public debt ratio will start declining this year, albeit from a very high level. The budget deficit was reduced a full percentage point of GDP more than envisaged last year, indicating the government's strong commitment to fiscal consolidation. 2) The country will conclude its three-year EU/IMF support programme in the near future, without the need for a precautionary credit line from the European Stability Mechanism (ESM). Portugal has regained access to the public debt markets and in addition the government has built up sizeable cash buffers. 3) Portugal's economic recovery is gaining momentum, with signs of broadening beyond exports, which continue to perform strongly. Moody's believes that economic growth will be sustained over the medium-term because the Portuguese authorities have implemented a wide range of structural reforms. - The review for possible upgrade reflects Moody's view that Portugal's creditworthiness can improve further in the short term, if the rating agency were to conclude that Portugal will likely manage to bring its very high public debt ratio (currently close to 130% of GDP) onto a clear downward path in the coming years. During the review, Moody's will assess the upcoming decisions of Portugal's Constitutional Court on key measures of the 2014 budget. Moody's considers these decisions to be important because the contested measures affect the key government expenditure items of public-sector wages and pensions. In Moody's view, achieving and maintaining low budget deficits over the medium term is difficult without addressing these key spending areas. In addition, the rating agency plans to evaluate the medium-term fiscal plan recently presented by the government and seek greater clarity about the possibility for a broad consensus to emerge on the need to maintain strict fiscal policies beyond the end of the current parliament.