The wealth generated last year was not enough for the country to pay off its external debt, according to the Bank of Portugal.
The Portuguese economy closed this year with an external debt standing at 101.3% of GDP, after reaching 104.9% in 2017, the Bank of Portugal announced this Wednesday.
External debt is calculated with the International Investment Position (IIP) indicator, which measures the indebtedness level of all economic agents, such as companies, families and the state.
Therefore, the external debt level is the difference between the amount owed by the country to foreign economic agents and what it has to receive from those abroad, and a sum of the deficits accumulated in 2018.
“By the end of december 2018, Portuguese IIP stood at -203.2 BN, a value that represented an upward variation of approximately one billion euros, in comparison to the end of 2017”, the central bank noted, adding that the external debt in proportion to GDP stood at 101.3%.
Last year’s final GDP values have not yet been revealed, and they will be only published on February 28 by the Portuguese Institute of National Statistics (INE). However, the BdP explained in its publication this Wednesday that it is “calculating the nominal GDP value for that trimester, based on the partial information released by INE”. On February 14, the Portuguese statistics office released a quick estimate on last year’s values, which allowed the central bank’s economists to do these calculations.
“IIP’s variation was motivated mostly by the combined positive impact of transactions (€1.4BN) and other adjustments (€1.6BN), partially offset by the exchange rate variations (-€1.3BN) and the price variations (€0.9 BN)”, the institution led by Carlos Costa explained.
Transactions were positively impacted by a surplus in the balance of payments, which stood at 0.4% of GDP. A positive value, which still stood below last year’s performance.
The bank has also exposed the details behind the negative evolutions in terms of exchange rates and price variations. The first was motivated by a “depreciation of kwanza which negatively impacts the value of Angolan assets detained by residents”, while the price fluctuation was caused by non-financial institutions selling their credit to non-resident entities, at an inferior value than that of the initial contract”.
The Portuguese central bank also stated that the net external debt, which is a result of IIP (excepting equity instruments, bullions of gold and other financial derivatives), got to 89.5% of GDP at the end of 2018. In contrast, by the end of the previous year of 2017, net external debt stood at 91.7% of GDP.