Portugal: Economic indebtedness reaches a new record high
The accumulated debt of households, companies and the state increased in October for the fourth month in a row. It set a new all-time high.
The economy’s indebtedness rose for the fourth consecutive month in October. The accumulated debt of households, companies and the state increased by about 1.859 billion euros in that month, setting a new record of 739.884 billion euros, according to data from the Bank of Portugal.
With the pandemic hitting economic activity hard, the debt ratio of the non-financial sector also rose to 361.6% of Gross Domestic Product (GDP). The Covid-19 outbreak forced the various governments to increase public expenditure on measures to support companies and workers, such as lay-off programmes and credit lines with public guarantees, something that was also followed by the Portuguese government. Also at the local level, several municipalities in the country put forward aid measures.
The Covid-19 outbreak forced the various governments to increase public spending on measures to support enterprises and workers, such as lay-off programmes and credit lines with public guarantees, something that was also followed by the Portuguese government. Also at the local level, several municipalities in the country have come forward with aid measures.
“The rise in public sector indebtedness was mainly reflected in the increase of financing granted by the financial sector (€1.5 billion) and the general government (€0.7 billion), partly offset by the reduction of financing granted by the external sector (€0.2 billion),” explains the Bank of Portugal.
In October, the increase in the economy’s indebtedness was mainly caused by the rise in public sector debt, which rose by 1.913 billion euros to 337.23 billion euros. Conversely, in the private sector, the debt fell slightly to 402.65 billion.
“Private sector indebtedness was practically unchanged, with the decrease of corporations’ indebtedness granted by the financial sector (€0.7 billion), being offset by the increase of corporations’ indebtedness granted by the external sector (€0.4 billion), and by the increase of households’ indebtedness granted by the financial sector (€0.2 billion),” the central bank adds.
