After nearly 15 years of sacrifice and sometimes less stimulating policies for the Portuguese economy, we managed to turn the situation around and are heading for the top 5 countries in the Eurozone concerning public debt. Ireland, which was with us in the worst club, quickly moved to the Eurozone's best by reducing its public debt to less than 80% of gross domestic product (GDP) back in 2015. Portugal, as usual, needed more time than others and chose a longer and multi-year path to finance itself with lower long-term interest rates than, for example, Spain. According to some of the latest forecasts from the International Monetary Fund (IMF) for 2024, our Portuguese debt ratio will be lower than that of Belgium and France.

Even with the trajectory of rising public debt interest rates from the European Central Bank (ECB) meeting on September 14, and the maintenance of interest rates in the latest publication this week by President Christine Lagarde. Portugal is now a different country from the times of the Troika and has rid itself of the damaging acronym of those PIIGS times (initials for Portugal, Ireland, Italy, Greece, and Spain).

The Hamas attack on Israel has not worsened our trajectory to date, with Portuguese interest rates dropping from 3.63% on October 6, the day before the terrorist attack, to 3.487% on October 31. In terms of the risk premium required by investors, the spread for Portuguese debt is lower currently than for eleven other eurozone economies, bringing us closer to the level required for Belgian debt.

Therefore, following this trajectory and fiscal caution, Portugal should have the third lowest interest rate in the Eurozone, similar to the Netherlands in December 2024. Forecasts from the World Government Bonds (WGB) portal suggest that in December of next year, Portuguese interest rates could reach 4.5%, about one percentage point more than today. But this also means that despite the expected rise in Portuguese public bond interest rates, we will still be among the five countries with the lowest debt rates in the Eurozone if the Portuguese government's budget strategy for 2024 materializes. This means that Portugal would have an interest rate level similar to Dutch debt and only higher than that of Germany and Ireland.

Author

Paulo Lopes is a multi-talent Portuguese citizen who made his Master of Economics in Switzerland and studied law at Lusófona in Lisbon - CEO of Casaiberia in Lisbon and Algarve.

Paulo Lopes