CFP updates its macroeconomic and fiscal scenarios until 2022

20 September 2018

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The Portuguese Public Finance Council (CFP) publishes today this year’s second edition of the report Public Finance: Position and Constraints 2018-2022 (Update), regarding the evolution of the economy and of the public accounts in this horizon, updating the projections published in March.

The analysis here presented is based on the information available at the moment, considering the observed evolution and the policy measures already adopted or specified with sufficient detail so that they can be included in the quantification exercise. The baseline scenario presented for the five-year period is based on the invariant policies hypothesis.

Regarding the evolution of the economy, the updated projections maintain the perspective of gradual slowdown of the growth rate in the medium term.

However, it is expected a change in the growth composition in 2018, pointing to a transition to a dynamic more based on consumption, being the impact on GDP neutralized by the negative effect of the slowdown in investment and exports.

In what concerns public finance, the current projection considers a deficit of 0.5% of GDP in 2018, below the estimated in March (0.7%). This determines a more favourable starting point for the fiscal developments in the medium term.

Considering this updated and in the absence of new policy measures, the General Government deficit for 2019 should be 0.2% of GDP, a projection that is in line with the Stability Program and that represents an improvement of 0.3 p.p. of GDP compared to 2018.

For public debt, the CFP expects a descendent trajectory of the ratio to GDP that should decrease from 125.7% in 2017 to 106.1% of GDP in 2022, a reduction of 19.5 p.p. in this time period after the stabilization observed in the last five years (-0.5 pp of GDP).