Public debt drops and growth beats forecasts
Portugal’s public debt ratio fell to 95.3% of GDP by the end of 2024, while GDP grew 2.7% year-on-year and 1.5% quarter-on-quarter in the fourth quarter, above the government's expectations.
Portugal’s public debt-to-GDP ratio fell to 95.3% by the end of 2024, surpassing government expectations, which had predicted a reduction to 95.9%.
This marks the lowest level of public debt since June 2010, according to data released by the Bank of Portugal.
Public Debt Performance in 2024
Despite the decline in the debt ratio, Portugal’s nominal public debt increased by €8.8 billion in 2024, reaching €270.7 billion by December.
This rise was driven largely by an increase in debt securities (+€7.5 billion), particularly short-term debt securities (+€5.9 billion), and loans (+€1.4 billion).
Conversely, deposit liabilities decreased by €0.1 billion, mainly due to a reduction in Treasury certificates (-€1.3 billion), partially offset by an increase in savings certificates (+€0.7 billion).
Public sector deposits increased by €1.9 billion, meaning that net public debt, excluding deposits, rose by €6.9 billion to €257.3 billion.
Economic Growth Drives Debt Reduction
The improvement in Portugal's public debt ratio was primarily attributed to stronger-than-expected economic performance in 2024.
According to the Instituto Nacional de Estatística (INE), Portugal’s economy grew by 1.9% last year, exceeding the government's forecast of 1.8%.
This economic growth helped offset the increase in nominal debt, leading to a 2.6 percentage point reduction in the debt-to-GDP ratio compared to the end of 2023.
Official projections for Portugal’s public debt ratio varied among institutions.
The Bank of Portugal had estimated a decrease to 91.2%, while the Ministry of Finance forecasted 95.9%.
The European Commission predicted a reduction to 95.7%, and the International Monetary Fund (IMF) projected 94.4%. The final figure of 95.3% surpassed most of these estimates, demonstrating better-than-expected fiscal performance.
Economic Growth Surges in Late 2024
Portugal’s economic growth accelerated in the final quarter of 2024, with GDP expanding by 2.7% year-on-year and 1.5% quarter-on-quarter.
This stronger performance was driven by increased private consumption, despite a slowdown in investment.
According to the INE, the contribution of net external demand to GDP growth remained negative due to stronger import growth compared to exports.
However, imports of goods and services declined in the fourth quarter, leading to a positive contribution from external demand after two consecutive negative quarters.
Following the release of these economic figures, Prime Minister Luís Montenegro emphasized the government’s commitment to economic stability and growth.
In a statement on social media, Montenegro highlighted that “a growing economy ensures better wages and sustains the welfare state. The financial and political stability we have secured creates the right conditions for investment and wealth creation.”
Portugal;s declining debt-to-GDP ratio signals an improvement in the country’s fiscal sustainability.
However, ongoing economic performance and financial management will be crucial in maintaining this positive trajectory.
With economic growth playing a key role in debt reduction, future policies will likely focus on sustaining economic momentum while managing public finances responsibly.