The evolution is clear: from 17% in 1974, public debt reached a maximum of 135% in 2020, driven by Covid-19, and is now below 100% for the first time since 2008. This increase was, nevertheless, accompanied of notable growth.
Half a century after the 1974 revolution, the Portuguese economy grew significantly, but so did the public debt. The increase after the end of the dictatorship was considerable, with the indicator only stabilizing at the end of the 1980s, and, despite recent positive developments, the increase compared to 50 years ago is more than 70 percentage points (pp), he details. to XTB.
The national economy saw gross debt soar from 396.5 million euros in 1974 to 263,084.8 million in 2023, one of only two years in the country’s democratic history in which there was a reduction in absolute terms in the stock of public debt . In terms of ratio as a function of GDP, the indicator went from 17% to 99%, having reached a maximum of 135% in 2020.
The brokerage’s historical analysis points to exponential growth in debt, but also in national GDP since 1974. In the year of the revolution, the indicator relating to state debt immediately shot up around 70% in relation to the previous year, continuing to rise uncontrollably in the years that followed, until the IMF interventions in the country in 1977 and 1983.
These interventions ended up, however, having “no impact on debt reduction”, which continued to increase in the following years. With the entry into the European community, budgetary discipline has become more important (despite the fact that the Maastricht Treaty and the restrictions it imposes are not yet in force), helping to manage not only debt, but also inflation.
“The results of the integration of the Portuguese economy into the European Union were immediately visible also in terms of debt, where the year-on-year variation began to decrease significantly compared to previous periods, as well as inflation”, states the XTB analysis.
“This period of strong economic growth during most of the 1990s was driven by increased investment, both public and private, and domestic consumption. EU funds have played a significant role, financing major infrastructure projects and promoting regional development,” he adds.
Since the 2008-2012 financial crisis, debt management has been more sustainable, identifies the broker, with the indicator falling since 2020, the maximum recorded in the year of the pandemic. XTB highlights that debt as a function of GDP “has been falling since 2020 and for more than 14 years it has not reached values below 100% in relation to GDP”.
“This was due to increases in national production, particularly in sectors such as tourism which have been registering a significant increase and, at the same time, the increase in the State’s tax burden, which has been reaching records”, explains the broker. As a result, national bonds regained their positive assessment, with the four world reference agencies classifying Portuguese debt as a quality investment.
