Portugal’s net external debt decreased to the lowest value since 2009
The international investment position also became less negative, from -104.8% of GDP in 2020 to -95.8% at the end of 2021.
Portugal’s net external debt fell to 80.7% of GDP at the end of 2021, the lowest value since the third quarter of 2009, according to the Bank of Portugal (BoP). The international investment position also became less negative, from -104.8% of GDP in 2020 to -95.8% at the end of 2021.
External debt fell from €175.6 billion at the end of 2020 to €170.6 billion at the end of 2021. This situation was explained by the improvement in the investment position, which reached the least negative value since the third quarter of 2008.
This improvement in the investment position can be explained by several factors, namely the “positive exchange rate changes in foreign assets the most notable of which was the appreciation in the US dollar, the Angolan kwanza, the Mozambican metical and the pound sterling, with an impact of €3.3 billion”, an effect that “is noted in portfolio and direct investment, where the capital component is more prominent.”
In addition, there was a “positive contribution of the devaluation of Portuguese government debt securities held by non-residents and the valuation of financial derivatives held by the resident financial sector; and with an opposite sign, the valuation of equity of Portuguese non-financial corporations held by non-resident entities”.
However, it was also seen a “negative contribution of other adjustments of -€1.2 billion mostly due to the relocation of an entity previously located in the Madeira Free Trade Zone,” according to the BoP. The reduction in the ratio is also a result of GDP growth.
