BIS central bankers’ speeches  3  This counterintuitive and undesirable initial effect will only be reversed by the cumulative adjustment of the primary balance, the reduction of the interest rate (which in turn depends on the credibility of the adjustment) and last but not least the increase in the economy’s growth potential.
The importance of economic growth for the trend of the public debt ratio may be illustrated with a simple calculation: starting with plausible values for Portugal in 2015 and keeping other relevant variables constant, a one-percentage-point increase in GDP growth over the period 2016–2020 leads to a debt ratio which is around 15 percentage points lower than the baseline. 2.