August 01, 2022
(reading time: 3 mins)
Summing up, data remains positive, as result of the favourable budget execution, mainly supported on strong nominal GDP growth and expenditures under control. Assuming balanced government figures at YE22, zero deficit, and a 2022 GDP nominal growth close to 7%; Debt to GDP should finish the yar at 122.8%, while higher nominal GDP, could mean Debt as a percentage of GDP close to 120%, slightly below Government target 120.8%.
The Bank of Portugal has just released, June’s Government debt data.
The main highlights are the following:
1. Gross Government debt (Maastricht definition) was almost flat sequentially at €280 563Mn; +1.11% YoY and 125.9% of nominal GDP (last 12 months, assuming nominal GDP +2Q22:+10%YoY) or -90bp MoM (target YE22: 120.8%). Compares with 12MMA (12 month moving average) 128.6% and 3MMA: 126.6%;
2. Net Government debt (after the deposits of Public Administration) is at €252 487Mn; -85bp MoM; -141bp YoY and 113.3% of nominal GDP vs. 12MMA: 118.6% and 3MMA: 115.0%.
Comment: The positive performance of Gross and Net Government debt, remains a direct result of the budget execution. In fact, over the last 12 months the accumulated deficit is close to zero: -€365Mn in a cash basis; while Net Government Debt is now lower by €3.6Bn YoY. Meanwhile, Gross Government debt (the data that matters to Brussels) is already flat MoM; as Deposits at Government Authorities are at €28.5Bn, a record figure.
Summing up, data remains positive, as result of the favourable budget execution mainly supported on strong nominal GDP growth and expenditures under control. Concerning Gross debt, the GDP ratio is now at 125.9% and the Government target 2022YE is: 120.8%. Assuming balanced figures by year end 2022, which at this point in time, 6 months in 2022, is a fair assumption, as the surplus in percentage of GDP is +1%YtD; it will mean Net debt at €253.7Bn at YE22; adding €25Bn of Deposits, already a conservative figure; it means Government debt Maastricht criterium at YE22: €278.7Bn. So, dividing by current Nominal GDP estimate (nominal growth: 7.4%) results in Debt to GDP at 122.8% YE22; while if we assume higher GDP nominal growth, close to 10%, due to inflation, Gross debt could finish the year at 120% in line with Government targets.
Source: Bank of Portugal, INE, AS Independent Research
António Seladas, CFA
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