World Economics has upgraded each country's GDP presenting it in Purchasing Power Parity terms with added estimates for the size of the informal economy and adjustments for out-of-date GDP base year data. Using the World Economics GDP Database it is possible to see more realistic debt levels for each country.
France 97.2 Italy 115.9 ___________________ Portugal debt to GDP ratio
2220 135% 2022 112.4%
Portugal has made significant strides in reducing its debt-to-GDP ratio over the years. Let’s explore how they achieved this:
Economic Recovery and Budget Surplus: Portugal managed to post a budget surplus for the first time in 45 years in 2019. This positive development signaled a turning point in their fiscal situation. However, just as they were on the path to recovery, the COVID-19 pandemic hit the country hard, posing new challenges1.
Growth-Interest Rate Differential: One of the key factors in reducing the debt-to-GDP ratio was a favorable growth-interest rate differential. As the economy grew, the relative burden of debt decreased. This differential helped stabilize the ratio2
Debt-Reducing Stock-Flow Adjustment: Portugal implemented measures to reduce the stock of debt over time. By managing their debt issuance and repayment, they effectively lowered the absolute amount of debt, contributing to the decline in the debt-to-GDP ratio2.
Consistent Downward Trend: Despite rising interest rates, Portugal maintained a consistent downward trend in their debt-to-GDP ratio. It is projected to continue declining to around 91% by 2027, which is close to pre-financial crisis levels. This prudent approach allows Portugal to control interest expenditure and overall financial stability
Actual Reduction in Debt: In 2023, Portugal’s public debt totaled 263 billion euros (approximately $283.9 billion), which was 9.4 billion euros less than the previous year. This reduction was attributed to factors such as outstanding bond and T-bill repayments, as well as positive net issuance of savings certificates4.In summary,
Portugal’s strategic management of debt, economic recovery efforts, and prudent fiscal policies have contributed to their successful reduction in the debt-to-GDP ratio. _________________
As of March 2023, the Japanese public debt is estimated to be approximately 9.2 trillion US Dollars (1.30 quadrillion yen), or 263% of GDP, and is the highest of any developed nation.
Modern monetary theory or modern money theory (MMT) is a heterodox[1] macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires.[2][3]
According to MMT, governments do not need to worry about accumulating debt since they can create new money by using fiscal policy in order to pay interest. MMT argues that the primary risk once the economy reaches full employment is inflation, which acts as the only constraint on spending. MMT also argues that inflation can be addressed by increasing taxes on everyone to reduce the spending capacity of the private sector.[4][5]
MMT is controversial, and is actively debated with dialogues about its theoretical integrity,[5] the implications of the policy recommendations of its proponents, and the extent to which it is actually divergent from orthodox macroeconomics.[6]
MMT is opposed to the mainstream understanding of macroeconomic theory and has been criticized heavily by many mainstream economists.[7][8][9][10]
