Economy shows greatest financing capacity in 2024 in last 20 years

The Portuguese economy financed other countries to the tune of 3.3% of Gross Domestic Product (GDP) in 2024, the highest financing capacity in almost three decades, the Bank of Portugal (BdP) announced on Friday.

“In 2024, the Portuguese economy financed other nations at 3.3% of GDP. This was the highest financing capacity seen since 1995,” the BdP said in a statement on the national financial accounts.

According to the central bank, households, the financial sector and public administrations had financing capacities of 4.7%, 1.6% and 0.7% of GDP, respectively.

In 2024, non-financial companies were the only resident sector to have a borrowing requirement of 3.7% of GDP.

Last year, households had the highest borrowing capacity, at 4.7% of GDP, the highest figure since 2020. This sector financed the others in net terms, with the exception of public administrations.

The BdP explains that the net financing of households to the financial sector contributed most to this result, at 3.2% of GDP.

In contrast to 2023, when individuals favoured investments in savings certificates and treasury bills, deposits increased again in 2024 (4.4% of GDP), the biggest increase since 2008, mainly driven by term deposits.

The rise in deposits was “partially offset” by borrowing (1.7% of GDP), with net lending by resident banks to households, mainly mortgages, also the highest since 2008.

As for the financial sector, in net terms it financed the rest of the world to the tune of 6.2% of GDP, the highest figure since 2014, mainly through the purchase of public debt securities issued by non-residents.

According to the BdP, resident banks increased their investment in debt securities issued by non-residents by €18.6bn, which was an all-time high for the year.

“In recent years, debt securities issued by non-residents have gained relevance in the debt securities portfolio of resident banks,” notes the central bank, detailing that at the end of 2024, these securities accounted for 45% of the total investment of resident banks in securitised debt.