The government guarantees public debt of 83.2% of GDP in 2028 --[Reported by Umva mag]

The Government estimates, in the first plan sent to the European Commission under the new community budgetary rules, a drop of 12.7 percentage points in public debt to 83.2% of GDP by 2028, mainly due to economic growth.
“At the end of 2024, public administration debt is expected to be at 95.9% of GDP [Gross Domestic Product]. In the four-year horizon of the plan [medium-term budgetary framework], the debt ratio is expected to maintain a downward trend, falling to 83.2% of GDP in 2028,” the executive notes in the document.
In the four-year Portuguese plan (2025-2028), sent by Lisbon and Brussels, given the new community budgetary rules, it is justified that this reduction of 12.7 percentage points (p.p.) during this period, at an average of 3.2 p.p. per year, “reflects the contribution of nominal GDP growth (-14.6 p.p.) and the maintenance of primary surpluses (-11.1 p.p.)”.
“These contributions are partially offset by the payment of interest (8.3 p.p. of GDP) and the upward pressure on debt resulting from deficit-debt adjustments (4.7 p.p.),” explains the Government.
Nevertheless, “despite the slowdown in nominal GDP growth in 2027 and 2028, it remains higher than the implicit interest rate of the debt, resulting in a favorable snowball effect throughout the entire horizon,” it assures.
An economic growth of 2.1% is also pointed out for 2025, 2.2% in 2026, 1.7% in 2027, and 1.8% in 2028.
At stake is the first medium-term budget plan with objectives for expenses and investments and reforms under the new EU economic governance rules.
Member States had until autumn to submit to Brussels the multi-year plans, four or seven years, which will now be discussed with the community executive so that, in 2025, the rules will already fully apply.
A reduction in public debt of at least one percentage point per year is defined for countries with a debt ratio above 90% of GDP (as is the case with Portugal) and half a percentage point for those between this ceiling and the threshold of 60% of GDP.
EU budgetary rules were suspended following the covid-19 pandemic and the war in Ukraine and will now resume after a reform in the community bloc.
“Despite the high uncertainty, the medium-term projection for the Portuguese economy is prudent and the balance of risks is favorable,” stresses the Government in the document, alluding to negative impacts related to geopolitical tensions and moderate growth in important commercial markets.
“However, these are offset by positive risks arising from the implementation of structural reforms and investments beyond those included in the Recovery and Resilience Plan [PRR], which will further boost economic activity throughout the projection horizon,” which thus allows that, “after a slowdown in 2024, the Portuguese economy regains its dynamism in 2025,” reads the document.

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