Market Update: Portugal’s economy debt falls to 277.9% of GDP in 2025 – Full Analysis

Portuguese economy debt fell in 2025 to 277.9% of Gross Domestic Product (GDP), the lowest value since records began, driven by the country’s strong economic performance, according to the Bank of Portugal.

The aggregate debt of households, businesses, and the state even increased in nominal terms, growing by €28.9 billion last year to reach €851.3 billion in December. Even so, the strong performance of the Portuguese economy led to a 6.24 percentage point drop in the non-financial sector debt ratio in 2025. This was the fourth consecutive year that the ratio fell.

Portugal’s GDP grew by 1.9% in 2025, below the government’s forecasts, but registering one of the best performances in the Eurozone.

According to data released this Monday by the Bank of Portugal, public sector debt decreased from 124.1% to 121.1% (-3 percentage points), and private sector debt (companies and households) decreased from 160.0% to 156.8% (3.2 percentage points) of GDP.

In nominal terms, public sector debt increased by €11.7 billion compared to 2024, reaching €371 billion at the end of last year. “This increase occurred mainly with non-resident entities (€9.0 billion), resulting from their investment in Portuguese debt securities (€13.4 billion),” explains the supervisor, noting that this increase “was partially offset by a decrease in loans (€4.0 billion), as a result of repayments made to the European Financial Stability Mechanism (€2.5 billion) and the European Financial Stability Facility (€1.5 billion).”

In the private sector, the growth of €17.2 billion was mainly due to “the increase in household debt to the financial sector (€12.5 billion), largely through housing loans”. Private companies owed €307.4 billion and households owed €172.9 billion at the end of last year.

The Bank of Portugal details that commerce, transport, accommodation and catering, and industries, electricity, gas and water were the sectors of economic activity with the greatest weight in the indebtedness of private companies, together accounting for 54% of the total.

Non-financial sector debt is an indicator that allows measuring the financial liabilities of non-financial sector entities to all sectors of the economy and the external environment.

The supervisor explains that this indicator corresponds to the contractually agreed amount that these entities must repay creditors on the due date, excluding interest. It includes loans obtained, debt securities issued by these entities (especially bonds), liabilities related to trade credits (debts payable to suppliers of goods and services and customer advances), and liabilities related to savings certificates, Treasury certificates, and other liabilities of the central government.

SOURCE: Bank of Portugal/ECO; Image: Governor of the Bank of Portugal, Álvaro Santos Pereira – JOÃO RELVAS/LUSA
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