Reducing Portuguese debt “will benefit” the economy, highlights consultancy XTB

The latest data from the Bank of Portugal (BdP) shows that total public debt continues to decline, and in December reached nearly 263 billion euros. This reduction represents about 1.8% compared to the values ​​recorded in November, when the debt approached 267.9 billion euros.

“This is a significant decline that reinforces the downward trend of public debt,” he added. “The debt securities component was the most affected, as the decline included almost four billion euros, and is almost entirely responsible for this decline in Portuguese public debt,” says consultancy XTB.

He also says this data will be positive for public accounts, as it could have an impact on interest paid on short-term debt, following increasing ratings increases by international agencies.

On the other hand, these values ​​are the result of the effect of the aggressive tax burden that has been exercised and the fact of increased national production. The tax burden in 2023 reached 37.2% of GDP compared to 36.4% in 2022, which at that time represented a 14% increase compared to 2021. The Portuguese economy grew in 2023 by 2.3% and in the last quarter it grew by 0.8 %. .

Consequently, “these components were responsible for reducing public debt as a share of GDP, which returned to double-digit levels. Currently, the value of debt as a function of GDP is 98.7%, which is an important milestone, as it has not been reached since 2009. This represents a decrease of about 13.7 percentage points compared to the same period last year.

In the coming months, “economic growth in the euro area is expected to slow, with the Portuguese economy not excluded. In the Portuguese case, modest growth in the range of 1% to 1.5% is expected for 2024. This economic slowdown could weaken efforts to reduce public debt.” Compared to GDP.However, if on the one hand the Portuguese public debt rating improves, this scenario of economic deterioration could put this continuity into question, if the economy begins to slow down more intensely.

On the other hand, if the Portuguese economy continues to show signs of resilience in the face of economic challenges, these debt reductions could further improve the public debt rating, the advisor concluded.