Macro View

(reading time: 3 mins)

Quick Comment: Debt performance in November, Maastricht definition, €269.1Bn, -25bpMoM/+88bpYoY and €95.4% of GDP (target YE24: 94.5%), Deposits went down €2BnMoM and explains the monthly improvement. In fact, net debt, after deposits, went up €1.3BnMoM to €256.3Bn. Regarding the budget execution until November, it remains ultra-loose, particularly October and November, Effective Expenditures: +10.4%YtD vs. Effective Revenues: +5.3%YtD. Over the last two months, the surplus year to date, went down €4.5Bn to €2.1Bn and should finish the year, on a cash basis, close to nil.  

The Bank of Portugal has just released, Government debt data in November.     

The main highlights are the following:

1 – Gross Government debt (Maastricht definition): €269,100Mn; -25bpMoM/+88bp YoY and 95.4% of GDP last 12months vs 12MMA (12 Months Moving Average): 98.7% and 3MMA: 96.3 (target YE24: 94.5%);

2 – Net Government debt (after the deposits of Public Administration; Maastricht definition): €256,340Mn; +53bpMoM/+193bpYoY and 90.9% of nominal GDP vs. 12MMA: 93.2% and 3MMA: 90.7%.

Separately, the Finance Minister released Monday evening, November’s budget execution. We would highlight the following:

1 – Surplus: €2,135MnYtD; -€4,490Mn vs. 2023YtD (excluding CGD’s pension fund contribution in March 2023);

2 – Surplus in percentage of GDP, on a cash basis, last 12 months: -0.06% vs. 12MMA: +0.7% and 3MMA: +0.5%;

3 – Effective Revenues +5.3%YtD vs. 12MMA: 6.6% and 3MMA: +0.2% (initial budget 2024: +7%);

Direct Taxes: +1.0%YtD vs. budget: -1.1% (IRS: -5.4%YtD and IRC: +15.4%YtD);

Contributions (mainly social security contributions, CGA…): +9.8%YtD vs. budget: +4.3%;

Non-Tax and Non-Contributory Revenues (dividends, transfers…):  +8.0%YtD vs. budget +26.4%.

4 -  Effective Expenditure:  +10.4%YtD vs. 12MMA: 9.6% and 3MMA: 9.8% (initial budget: +12.6%;

Employees: +8.1%YtD vs. budget, 5.6%;

Purchase of Goods and Services: 9.9% vs. budget: 11%;

Interest and Other Charges: +3.5% vs. budget 8.5%;

Current Transfers (mainly pensions and social support): 13.2%YtD vs. budget: 7.5%;

Others (subsidies, Investment…): +9.5% vs. budget: 49.7%.

Comment: Debt performance In the last few months has been impacted by the poor budget execution; in fact surplus went from roughly €5.7BnYtD, until September to €2.1BnYtD, until November and should close the year around nil. So net debt, after deposits, increased by roughly €4Bn over the last two months to €256Bn, +193bpYoY. Meanwhile, gross debt, before deposits, Maastricht definition, is now at €269Bn +88bpYoY, less €3Bn, over the last two months and 95.4% of GDP (target YE24: 94.5%), as deposits went down from €19.9Bn in September to €12.7Bn in November and should finish the year at €11Bn, in line with December’s 2023 data, however clearly below moving averages. The main idea is to reach the target of 94.5% of GDP at year end 2024; which at this time is not certain, unless deposits at Public Administrations reach a new low.                   

Concerning the budget execution until November, as we mentioned above, the surplus on a cash basis was reduced by roughly  €4.5Bn (excluding CGD pension fund contribution in 2023) to €2.1Bn, mainly because effective Expenditures are increasing 10.4%YtD; vs. effective Revenues: 5.3%YtD (in November Expenditures: -0.5%YoY and Revenues: -13.9%YoY). So, 2024 budget execution remains ultra-loose, namely in October and November, however help to explain the strong performance of retail sales in October and November.                       

Source: Bank of Portugal, INE, AS Independent Research