Portugal can reduce its external debt further says Medina

The Portuguese Finance minister Fernando Medina said yesterday that Portugal had the conditions to continue to reduce external debt over the next few years despite the rate of inflation slowing.

“Portugal’s public debt has the conditions to continue to fall. We have a surplus balance of trade, and forecasts for the next few years also seem to point in this direction. This means that we also have the conditions to continue to reduce our external debt”, he said at the conference “The Power to Make It Happen’ organised by Jornal de Negócios.
Fernando Medina stressed that “in recent years the State, families, and companies have reduced their debt. As a country we owe less, which means its a plus for everyone: companies, families and the State”, he said, emphasising that this reduction in debt is a “prerequisite” to win credibility in the international financial markets.
In the case of public debt, Fernando Medina said that this year it should be below 103% of GDP, less than Greece, Italy, Spain, France and Belgium. “If next year budget plans go as forecast, the public debt will be below 100% of GDP,” he said.
To a large extent Portugal’s reduction in public debt can be explained by the increase in inflation. In 2022, inflation contributed to around a third to the cut in debt, taking into account that the overall rise in prices inflates nominal GDP, which serves as a denominator to the ratio of public debt.
However, despite inflation being on a downward trajectory, the minister of Finance holds the conviction that the ratio of debt should continue to fall.
On the other hand, inflation has also made it possible to reduce private, company and family debt. “Family debt in the second quarter of 2023 fell by around 60% when it had been over 80% in 2016. Company debt fell to 116% of GDP when it was 150% in 2015”, he said.

MIGUEL A. LOPES/LUSA
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