Thursday, February 23, 2012

Portugal missing a quarter of their funding needs from the official debt/GDP ratio

Portugal’s general government debt is now at 107.2% of the GDP. According to BNP Paribas, this figure does not include half of the State-owned enterprise (SOE) debt. They estimate that some EUR 15bn is missing. Not a big number from the perspective of the US, but for Portugal it's a chunk of change. In fact it's a quarter of the nation's funding needs for the next three years.

SOE debt included and not included in the Debt/GDP calculation (source: BNP Paribas)

The question is what will happen when they do include the SOE debt and/or Portugal's GDP tanks more than estimated (a fairly likely scenario). It is important to remember that Portugal will need to come to the markets in 2013. With an increased debt/GDP ratio, the private markets may be completely closed to Portugal and the nation will likely need to extend its current EU/IMF loan (which is now some 20% of total government debt).
BNP Paribas Research: And as the funding needs of the SOEs are set to amount to EUR 15bn over the next three years, at least some of this will have to be taken into account in calculating any extended financing programme. The total market funding needs of the Portuguese government to 2015 are around EUR 45bn as things stand. If the financing needs of the out-of-calculation SOEs are taken into account, this could rise to more than EUR 60bn.
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