The European Commission presents this Monday the spring macroeconomic bulletin, with more optimistic forecasts than those of the Government, on the growth of the Portuguese economy. Brussels forecasts an expansion of the Portuguese economy to 2.4% by 2023 and 1.8% in 2024.
The European Commission considers that the Portuguese economy has been showing signs of a solid recovery, but estimates, even so, that the growth rate registered in the first quarter of this year will weaken in the second third of 2023, to recover again in the summer months.
Growth
In the first quarter of 2023, the economy was driven by an increase in tourism, with “GDP growth estimated at 1.6% [no primeiro trimestre]well above the rates recorded in the three previous quarters”.
Brussels stresses, however, that the economy is facing challenges, in particular due to “weak domestic demand”, in particular because “private consumption was conditioned by the decline in household purchasing power in previous quarters”, by same time that “investors were faced with higher interest rates.”
“Economic growth is expected to weaken in the second quarter of 2023, but to “recover in the following quarters”, such as the gradual recovery of real disposable household income and private consumption.
Inflation
According to the Spring Macroeconomic Bulletin, “nominal inflation should moderate.” Last year, Portugal spent the year with inflation at 8.1%. Brussels estimates that this indicator will be set at 5.1% at the end of 2023, to continue decelerating to 2.7% in 2024.
“The reduction was largely driven by lower energy prices, while food prices remained high,” says the document published by the European Commission.
deficit
Regarding public finances, Brussels makes a favorable prognosis. After the deficit “has decreased to 0.4% of GDP in 2022”, it is expected to decrease “to 0.1% of GDP in 2023”, maintaining the same forecast for 2024.
Brussels points out, however, that “tax revenues are the main engine of this growth, especially indirect taxation, which continues to reflect the maintenance of high prices.”
Energy
The document highlights that “the net budgetary cost of energy support measures” is projected at 0.8% of GDP in 2023″, highlighting “the considerable decrease” compared to 2.0% in 2022.
Brussels anticipates that the energy support measures “should be completely eliminated in 2024”, admitting that “the 2023 deficit will also be affected by the supposed total elimination of the temporary emergency measures of COVID-19, which corresponded to 0, 8% of GDP in 2022.”
Debt
The public debt/GDP ratio contracted sharply to 113.9% in 2022, already below pre-pandemic levels. It is expected to continue on a downward trajectory in 2023 to 106.2% and 103.1% in 2024, driven by a “growth differential, favorable interest rates, and improvements in the overall primary balance.”
Source: TSF
