Property taxes could still rise, the reduced VAT (6%) should apply to fewer products and the end of the golden visa regime is not expected to affect house prices in Portugal, according to the International Monetary Fund (IMF) mission statement. , in the new annual country review (Article IV).
In the summary of the study, released yesterday (Tuesday, May 9), the IMF team, led by economist Rupa Duttagupta, who was in Portugal during the height of the political crisis (from April 26 to May 5), recommends government to take measures that increase revenue on a sustainable basis and improve the composition and efficiency of expenditure”.
“Tax reforms should aim at eliminating existing distortions, reversing reduced VAT rates and rationalizing tax incentives [despesa fiscal”, diz o estudo.
“A modernização do sistema fiscal, incluindo a digitalização da administração fiscal, melhoraria a eficiência fiscal.”
Neste campo, o FMI sugere “o reforço dos impostos sobre a propriedade [imobiliário] because it would increase revenues and help alleviate house price pressures”.
The IMF recognizes that Portugal indeed has a serious housing problem and proposes measures.
“The supply of affordable housing has declined, especially for low-income households and renters,” the mission says.
And he adds that “the envisaged end of the Golden Visa program [vistos gold] should not significantly affect house prices” in the country.
For example, the cabinet must first “take measures to increase the supply of homes and rental properties – supplemented by government investments in social housing in the context of the National Recovery and Resilience Plan (PRR)”.
These types of measures “are essential to reduce housing imbalances and improve affordability”.
In addition, the IMF mission continues, “the reduction in energy prices opens a window for an increase in carbon taxes”.
On the expenditure side, the government should make progress with “measures that increase the percentage of public investment in current expenditure – namely through the application of the PRR”, “reversing recent trends”.
“The main priorities are to improve the sustainability of pensions, to contain the trend towards an increase in public sector wage costs, to strengthen the financial situation and efficiency of the National Health Service (SNS) and to continue to improve the orientation of social spending”, which should focus more on those who need it most, the poorest, the mission defends.
As for government debt, Duttagupta said at a press conference that the fall in the debt ratio to 114% of gross domestic product (GDP) was something “remarkable” but nevertheless remains too high and should continue to fall and fast.
“We live in a world that is more sensitive to shocks”
“We live in a world more sensitive to shocks and countries need to build up buffers” and “room for manoeuvre” to cope with possible “bad times”.
The Fund’s experts have some concerns about the impact economic and financial conditions may have on banks through the real estate market (e.g. slowdown in activity, aggressive rise in interest rates, upward pressure on bad debts).
“In order to make the banking sector more resilient to macro-financial risks arising from real estate exposures, the Portuguese authorities should consider phasing in an equity reserve [uma almofada]that addresses this heightened risk that now hangs over banks.
In addition, the mission says, unsurprisingly, that the government should make an effort to implement the PRR subsidies properly and quickly, as they do not, for example, put any direct pressure on debt, the economist said.
The head of the mission was also questioned about the political crisis, which became very acute between the President of the Republic and the government during the days he was in Portugal.
“We do not comment on political developments, but we assume there is continuity in policy,” he replied.
Decisive tourism to double the forecast
In terms of forecasts for the Portuguese economy, there were also significant changes from what the IMF said less than a month ago.
At the time, the Fund calculated that the country would grow by 1% this year, predicted the April forecast, but it should still grow much more this year, more than double the pace: the economy should grow by 2.6%. should grow, a forecast that largely exceeds all others made more recently, including that of the government, which in April included growth of 1.8% in the Stability Programme.
The IMF mission has also revised inflation forecasts for this year slightly downwards (from 5.7% in the world economic outlook to 5.6% today), but this figure already exceeds that of the Ministry of Finance, Fernando Medina, those in the stability program predict 5.1% in 2023.
In a press conference, the head of mission revealed that “we were surprised by the result in the first quarter, by a much stronger growth than expected”. “It was largely the result of tourism growth, where the recovery has been stronger than expected.”
“Even if the economy stopped growing for the rest of the year, it would grow by more than 2% in 2023 just because of this factor.” [explosão no turismo no arranque deste ano]said Rupa Duttagupta.
In any case, after a strong start to 2023, the mission “projects that real GDP growth will slow for the remainder of the year and the eurozone will weaken export growth,” the IMF concludes.
Luís Reis Ribeiro is a journalist for Dinheiro Vivo
Source: DN
