Portugal’s debt down 7.8 p.p., third highest fall in EU

Portugal recorded the third largest reduction in government debt in the EU last year, only behind Greece and Cyprus, according to Eurostat this Friday.

Portugal’s government debt fell 7.8 percentage points from 135.2% of GDP in 2020 to 127.4% of GDP in 2021. However, it had risen by 18.6 percentage points from 2019 (116.6% of GDP) to 2020 because of the pandemic’s double impact on debt and GDP.

In Greece’s case, where the ratio fell by 13.1 percentage points, government debt fell from 206.3% of GDP in 2020 to 193.3% of GDP in 2021. Cyprus saw its ratio shrink from 115% of GDP in 2020 to 103.6% of GDP in 2021, down 11.4 percentage points.

In contrast, there were seven countries where the ratio even rose in 2021: this was the case in Czechia (4.2 p.p.), Malta (3.6 p.p.), Slovakia (3.3 p.p.), Romania (1.6 p.p.), Latvia (1.5 p.p.), Germany (0.6 p.p.) and Bulgaria (0.4 p.p.). On average, in the Eurozone and in the European Union, the ratios of government debt to GDP fell in 2021 to 95.6% and 89.9%, respectively.

Despite this sharp reduction in the ratio, Portugal still has the third highest government debt in the European Union, only surpassed by Greece and Italy. The goal of António Costa’s government is to remove the country from the club of the most indebted countries in the EU, being replaced by France, Belgium and Spain. By 2026, the goal is to get close to the threshold of 100% of GDP.