The Portuguese Public Finance Council (CFP) is launching a new series of publications called “Fiscal Risks and Public Finance Sustainability“, which will be updated every two years.
In this report, the CFP takes as a starting point its most recent medium-term projections (published in March) for the main macroeconomic and fiscal variables under a ‘no policy change’ scenario and analyses the fiscal risks Portuguese economy faces.
The CFP focused the risk analysis in five areas: macroeconomic performance, public revenue and public expenditure, contingent liabilities and public debt. In this report, risk is understood as a measure of uncertainty regarding the possible deviation from the expected result of a variable, which may be positive or negative. Sustainability is understood as the ability of the State to sustain the commitments made with its citizens and creditors.
The recognition of these risks and the attempt to regularly identify them and quantify their impact are essential to the sound management of public finances, since this is the only way to create the conditions for fiscal policy to mitigate the effects of economic fluctuations and thus increase the resilience of the economy to shocks.