Recent developments in the Spanish Autonomous Community of Catalonia should have no immediate effect on the sovereign ratings or outlook on Spain, according to a leading ratings agency.
On Friday (27 October), the Catalan regional parliament voted in favour of independence from Spain.
The Spanish central government responded by invoking Article 155 of the Spanish constitution, which removed Catalonia's regional government from office and dissolved Catalonia's regional parliament.
The central government also announced that new regional elections would be held on 21 December.
Subsequently, lawmakers have called for the arrest of the ousted Catalan president Carles Puigdemont and eight members of the deposed government have been arrested.
However, S&P Global Ratings – that rates Spain (as BBB+/Positive/A.-2) - said in its view the orderly application of Article 155 and the frontloading of regional elections have reduced the likelihood of a short-term escalation of tensions.
"As stated in our previous releases, we do not believe that Catalan independence will occur. As we expected, no national government has recognised Catalonia as an independent state," the agency noted.
"The most prominent credit risk we continue to see is that the related tensions could lead to a sustained drop in business and consumer confidence and potential business disruption from fourth-quarter 2017 onward, especially in Catalonia."
S&P added that while the economic consequences of these developments have yet to emerge, Spain's most recent economic data were positive.
In third quarter of 2017, the country's GDP growth remained robust at 0.8%, while the unemployment rate fell to 16.4%, the lowest level since 2008.
"This confirms our expectation of Spain's strong economic performance," the agency concluded.