In 2023, the weight of Portugal’s public debt, as measured in relation to gross domestic product (GDP), should remain the third highest in the Eurozone and the sixth highest in the group of the world’s most advanced economies. International Monetary Fund (IMF) in its new Budget Monitor.
The accounts, prepared by the IMF’s Budgetary Affairs Department, headed by Vítor Gaspar, the former Portuguese finance minister, reflect the wish expressed several times by Fernando Medina, the current head of national public accounts, for the country to this year already from this podium.
If IMF forecasts come true, government debt will fall to 112.4% of GDP this year, still above the levels of France (111.4%) and Spain (110.5%).
In 2024, Portugal finally leaves this stage with a bad name (with 108.6% of the debt), overtaken by France (112.4%), something Medina already wanted to happen in 2023 (but says she is working hard on it) .
Nevertheless, Spain continues to have a lower relative debt burden (108.3%).
It will be there in 2024
As mentioned, according to the IMF study, it is not until 2024 that Portugal rises from the podium and becomes part of a debt platoon of sorts. It remains very high, above 100% of GDP (more precisely 105.2%, says the Fund), but at the end of that year the government can already say that it will have the sixth highest debt in the euro Zone, behind Greece, Italy, France, Belgium and Spain.
It should be remembered that this plan to remove Portugal from the podium of the most indebted states was announced by the Minister of Finance in mid-October when the state budget for 2023 was presented.
Medina even repeated this mantra several times. He said at the time that “until the start of the pandemic, we held a prominent third place in the ranking of countries with the highest public debt in the Eurozone”, but emphasized that the government had “achieved the target for 2022, 2023 and subsequent years to scrap Portugal of the list of countries with the most debt”.
The minister underlined the importance of leaving “third place” and joining the so-called “peloton”, something he classified as of “enormous value because Portugal is no longer a matter”, which is beginning to “belong to a platoon of caliber cyclists”. .
According to IMF calculations, this will be the case, but not until the end of 2024, when government debt and related ratios are calculated for that year.
Collision in shortage figures
In any case, it became clear yesterday that Gaspar and Medina are at odds with the most important estimates and forecasts of public finances. Also in shortage, for example.
The IMF forecast Portuguese government deficit will fall from 1.9% of GDP in 2022 to 1.2% this year, according to the new Budget Monitor.
But the forecasts released now clash with the latest ones prepared by national authorities and sent to Brussels by the National Institute of Statistics (INE) on March 24, to Eurostat.
There, the official deficit calculated by the INE will have remained at just 0.4% of GDP, a value the government used to justify a return to fiscal slack through new support against the effects of inflation, a largely obtained margin , with last year’s very high inflation. In the INE report, the Ministry of Finance calculated a slight increase in the deficit this year to 0.9%.
The starting point of the IMF and the team led by the former Minister of Finance of the PSD is the aforementioned deficit of 1.9% in 2022, the same value that was included in the National Budget 2023 drawn up in October, six months ago.
On 30 March, the final discussion of the Budget Monitor and the figures took place in the IMF Executive Board. The reporting of deficits and Portuguese debts published by INE took place a week earlier, on March 24, but the IMF did not use the figures officially calculated on that date.
In short: Gaspar predicts that Portugal, albeit with a higher starting point (deficit in 2022), will experience even more difficulties.
Medina, on the other hand, says it will expand the deficit slightly, but from a very low level in 2022 (the so-called 0.4%).
The IMF says it excludes “social security” schemes from the budget accounts when calculating the budget balance. In English: “excluding social security systems”.
As mentioned, Vítor Gaspar’s department forecasts a reduction in the deficit of seven-tenths of a percentage of GDP. Medina assumed a slight increase of five tenths, to 0.9% this year.
There are also differences with regard to debts. According to Gaspar, Portugal will have ended 2022 with a public debt of 116% of GDP. The figure reported by INE (calculated by Banco de Portugal, by Mário Centeno) is lower: 113.9%.
According to the new IMF study, Portugal’s debt will fall by almost four points of GDP to 112.4% in 2023.
The PS minister, on the other hand, says that the starting point is lower (the so-called 113.9% of Centeno), but the fall remains sharp, bringing the target for the end of this year to 110.8% of GDP. It corresponds to about 3% of GDP less in the government debt ratio.
Debts must be reduced
Be that as it may, the message from the IMF is one of alertness, much caution, given the “unstable” times we are living through.
“On average, advanced economies and emerging markets (excluding China) saw debt reduction of about 2% to 3% of GDP last year, largely due to inflation surprises.”
IMF experts advocate “medium-term budget plans that include a credible political commitment to achieving debt sustainability – that is, they must announce specific spending and revenue measures or reforms – while at the same time providing flexibility to deal with shocks” .
Luís Reis Ribeiro is a journalist for Dinheiro Vivo
Source: DN
