Portugal will spend 5.108 million on debt interest in 2022. Saves 5.4% compared to this year – State Budget
The Portuguese State’s expenses with interest on the debt will maintain the downward trend in 2021. According to the State Budget proposal for 2022 (OE2022) that the Government delivered this Monday to Parliament, the estimated expenditure on interest is 5,108 million euros in 2022, 293 million euros less than the 5.401 million euros or 5.4% than this year.
In terms of weight in the economy, this charge will represent, next year, 2.3% of GDP, against 2.6% this year. “Throughout 2021, the external credibility was again proven, with a historic issue with a negative interest rate, the rating increase by the Moody’s agency and the first issue for 30 years since 2015,” the report refers.
“The path of external credibility trodden over the last few years, has already helped us to save 3,000 million euros in interest compared to 2015,” he says. Portugal has benefited, in international markets, from investor confidence.
In addition to the investment grade rating and the consolidation of public accounts, the expansionist policy of the European Central Bank (ECB) – in particular the mega program for the purchase of public and private debt – has helped to reduce financing costs.
The cost of the State’s direct debt fell, in the past, to 2.2%, while interest rates on new bonds dropped to 0.5%. Since the beginning of the year, fears regarding the acceleration of information (due to strong monetary and budgetary stimuli) have led to a worsening of yields, with the costs of new debt rising to 0.6% between January and August, according to with data from the Treasury and Public Debt Management Agency – IGCP.
The pandemic crisis took the public debt ratio to a record 133.7% of GDP in 2020, which represented an annual increase of 16.5 percentage points (the biggest annual increase since at least 1995 when the series started) . For 2021, the projection is for a decrease to 130.9% with the help of a growth of 4.8% of GDP.
In relation to 2022, the Government points to a public debt of 123%, an economic growth of 5.5% next year and a deficit of 3.2% (compared to 4.5% this year), according to the macroeconomic scenario inscribed in the State Budget proposal for 2022 that the Executive delivered this Monday to Parliament.
“The public debt ratio as a percentage of GDP should return to the downward trajectory of the years prior to the pandemic crisis. Thus, in 2022, this indicator is expected to reduce by 4.1 pp, to 122.8% of GDP. The contribution it will be given by the growth of the nominal GDP which more than offsets the remaining effects”, says the Government.