The governor of the Bank of Portugal (BdP) said today that the country’s public debt is “very significantly” approaching the eurozone average, and could reach 70 percent of gross domestic product (GDP) in seven years’ time.
“Public debt is very significantly approaching the eurozone average. If, at the end of this decade, we maintain the existing indicators in 2019 (primary balance and growth rate differential compared to the nominal interest rate), we will be approaching debt levels of around 70% of GDP, well below the euro average,” said Mário Centeno at a conference at the University of the Azores, Ponta Delgada.
On May 31, the BdP bought 3.1 billion euros worth of Portuguese public debt, down 84.5% on the previous year, reflecting the change in monetary policy strategy in the eurozone.
The reduction to 3.1 billion euros of Portuguese public debt purchased by the BoP means a reduction of 84.5% compared with 2021 and results from the end of net asset purchases, in April (PEEP) and July (APP) respectively.
Mário Centeno noted that Portugal “has been converging with the eurozone, in real and economic terms since 2016”.
The governor asserted that this is due, among other things, to “the extraordinary educational transition taking place in Portugal”.
Mr. Centeno said that Portugal “was at the bottom of the most developed countries in terms of students completing at least secondary education (40%)” and that, “20 years later, this figure has risen to 85%” and is “well above the eurozone average”.
The head of the BdP felt that “this silent revolution began in Portuguese families, who are the workers of this transition”, and that it was “absolutely essential to be able to qualify the growth that exists in Portugal today as structural, because it is transforming the Portuguese productive structure”.
The Governor linked structural growth to the “political and financial stability that has finally been achieved”, pointing out that Portuguese debt “yields less than Spanish and Belgian debt, and is very close to French debt”.
Mário Centeno stressed that risk “has been reduced because for the first time, in a crisis context, families and companies have reduced their indebtedness”.
“This has never happened before in Portugal. Today, in 2023, the net debt of household and corporate deposits is lower than it was in 2019”, he said, after pointing out that “Portugal, today, is not the same economy”.
In the country, if we compare the first quarter of 2019 with the same period in 2023, Social Security data reveal that there are “348,000 more jobs”, including 112,000 “created in the information, communication, real estate, consulting and science sectors”, which “were in the minority” and accounted for 10.8% of total employment four years ago, he stressed.
During the pandemic crisis, and again during its recovery, these sectors “were responsible for more than a third of the jobs created in Portugal”.
The governor pointed out that tourism (accommodation, catering and transport) “is not responsible for the largest share of job creation, quite the contrary”, with “less growth”, generating 44,000 jobs, while in 2019 it was in higher figures than the sectors currently growing.
