The government debt-to-GDP ratio fell from the first quarter to the second quarter, reaching a new low from early 2012.
Public debt closed the first half weighing 122.2% of GDP from the Maastricht perspective, which is of interest to the European Commission, which represents the smallest ratio since the first quarter of 2012 (118.2% of GDP).
The data was updated this Thursday, August 22, by Banco de Portugal, after the National Institute of Statistics (INE) revealed the rapid estimate of GDP for the second quarter.
The previous low was reached by the end of 2018 (123.6% of GDP) and was also relative to 2012 but to the second quarter (123.5% of GDP) of that year.
The amount of government debt recorded in June 2019 is higher than December 2018, but the growth of the economy allows the weight of state debt to decrease.
These debt figures are already accounted for by the methodological change at the European level which led to a 2.1 percentage point increase in public debt. At stake is a methodological change in the recording of capitalized interest on savings certificates in public debt which led to an increase of 4.259 million euros in public debt.
The Government, which aims to achieve a ratio of 118.6% of GDP, admitted revising this forecast. Because with the change in the statistical series, the Executive, instead of having to reduce 2.9 percentage points compared to last year, now has to reduce five percentage points, almost double the effort.
The Executive may, therefore, have to revise estimates upwards – which will call into question the achievement of a ratio below 100% in 2023 as foreseen in the Stability Program – but this should only happen in the next parliamentary term in the presentation of the Budget. State for 2020 and by the hand of the next Government.
On the one hand, the evolution of interest rates on Portuguese debt and, dragging on, the cost of debt, has been more favorable than expected, which will help to reduce the debt burden. In addition, the finance minister has announced that Portugal should repay two billion euros of its debt to European creditors, which will further reduce public debt.
On the other hand, everything will depend on the evolution of the economy as the ratio depends on GDP – this in a year when the strong European braking is taken for granted – and also on the budget balance which, if it becomes surplus, could contribute to a faster debt reduction.
In the case of the economy, Portugal was even able to stand up in the second quarter. In the case of the budget balance, the numbers here to tend to be positive.