Lisbon, Sept. 19, 2024 (Lusa) - The Portuguese Public Finance Council (CFP) estimates that the Portuguese economy will grow by 1.8% in 2024, an upward revision of the projections released in April, according to the update published on Thursday.
In the updated Economic and Budgetary Outlook 2024-2028, which is drawn up under a no-policy-change scenario, the CFP projects a "slowdown in the rate of growth of gross domestic product (GDP) in volume to 1.8% in 2024 (2.3% in 2023)", up from the 1.6% growth it estimated in April.
Although the GDP growth forecast for this year has been revised upwards, it is lower than the government's estimate of 2%, according to the macroeconomic scenario that was transmitted to the parties by the executive at the meetings on the state budget for 2025.
The Bank of Portugal also predicts growth of 2% in 2024, according to its June economic bulletin, while the European Commission points to a rise of 1.7% and the OECD of 1.6%.
For the coming years, the CFP projects growth of 2.4% in 2025 (up from April's projection of 1.9%) and 2.1% in 2026.
"This performance will be driven by the acceleration of public investment, especially through the execution of the Recovery and Resilience Plan (RRP) funds. Policy measures with an impact on household disposable income will contribute to the dynamism of private consumption in 2025," explains the organisation led by Nazaré da Costa Cabral.
As for inflation, as measured by the harmonised index of consumer prices (HICP), this "should also decelerate to 2.7% in 2024 and 2.2% in 2025, stabilising at around 2% from 2027 onwards", reflecting the European Central Bank's monetary policy and the "decrease in inflationary pressures associated with the prices of energy raw materials and foodstuffs".
The projection for this year is revised upwards compared to the April outlook, which pointed to an HICP variation of 2.6%.
For the labour market, this scenario "foresees a higher rate of job creation in 2024", says the CFP, although it points out that "demographic constraints should limit its growth in the medium term, with employment projected to grow by zero at the end of the projection horizon, while the unemployment rate should fall from 6.5% in 2024 to around 6.0% in 2028".
In this outlook, the CFP points out that there are downside risks to this scenario "largely related to the highly uncertain foreign context, including geopolitical tensions associated with the fragmentation of world trade and armed conflicts, the risk of volatility in the financial markets, namely due to the evolution of inflation, and monetary policy itself, as well as, more gradually, the risks associated with climate change and the degradation of natural capital".
"As for the upside risks, there is a more favourable variation in domestic demand, especially private consumption, in a context of a greater propensity to consume on the part of families, combined with high savings rates, interest rate cuts and fiscal policy measures with a positive impact on income," the institution points out, concluding that, "as a whole, the risks are considered to be globally balanced, both for growth and inflation."
The CFP also released its budget outlook, which points to budget surpluses until 2028, "but on a smaller scale than projected in April, as a result of the impact of the measures approved in the meantime".
The public debt ratio "is expected to stand at 78.3% of GDP in 2028, which represents a decrease of 20.8 p.p. of GDP compared to 2023’.
The Portuguese Public Finance Council (CFP) is an independent body that monitors compliance with budgetary rules in Portugal and the sustainability of public finances.
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