Portugal seeks to cut debt ratio below that of Spain, France this year

Portugal's Finance Minister Fernando Medina in an interview with Reuters

By Sergio Goncalves

LISBON (Reuters) - Portugal's government plans to further slash one of Europe's heaviest public debt burdens and reach a debt-to-GDP ratio below that of Spain and France in 2023 by sticking to budget controls, Finance Minister Fernando Medina said on Tuesday.

Despite a Europe-wide economic slowdown, the government is targeting a budget deficit of 0.4% of GDP this year, the same as in 2022, which Medina called "almost balanced".

The debt-to-GDP ratio, which finished last year at 113.9% after dropping from more than 125% in 2021, is expected to decline further this year to 107.5%.

That should move Portugal's debt ratio down from the euro zone's third-highest after Greece and Italy, to the sixth spot, "close to the 100% threshold", Medina said, allowing the country to save on interest payments and gain future security.

Spain expects to end 2023 with a debt ratio of 111.9%, while France forecasts 109.6%.

"Portugal has to continue the path of a cautious, thoughtful and risk-focused approach...always with the ambition to seek ever better conditions for the country and doing nothing to put it at risk", Medina told a capital markets conference.

He expects inflation to slow throughout the year, particularly in the second half, with several months below 3% after an annual rate of 5.7% in April.

The government expects the economy to grow 1.8% this year compared with 6.7% last year. The European Commission and the International Monetary Fund have recently increased their forecasts for Portugal's growth to 2.4% and 2.6%, respectively, after stronger-than-expected expansion in the first quarter.

(Reporting by Sergio Goncalves; Editing by Kirsten Donovan)