By Kelly Cloonan

Moody's boosted Spain's sovereign credit rating citing an improving economy and a better labor market.

The ratings agency on Friday upgraded Spain's rating one level to A3 from Baa1. The outlook was revised to stable from positive.

"The decision to upgrade Spain's ratings to A3 reflects our view that Spain's economic strength is improving due to a more balanced economic growth model, improvements in the labour market, and strengthening in the banking sector that increase the economy's resiliency," Moody's said.

The country's economic growth should also get a boost from its competitive advantage in renewable energy production, Moody's said.

The ratings agency expects Spain's labor supply constraints will be relieved over the next few years because of positive migration flows and incentives to prolong the years people spend working. A robust economic environment allows the government's debt burden to gradually improve, which should continue, Moody's said.

While Spain's economic potential may improve further, given early signs of improving investment, a decline in the country's debt burden relies on robust growth, the ratings agency said.

Write to Kelly Cloonan at kelly.cloonan@wsj.com

(END) Dow Jones Newswires

September 26, 2025 17:20 ET (21:20 GMT)

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