
The Portuguese Public Finance Council (CFP) publishes today it’s Opinion on the Macroeconomic forecasts underlying the National Medium-Term Fiscal-Structural Plan for 2025-2028 (NMT-FSP), presented by the XXIV Constitutional Government in the XVI Legislature. The drafting of this Opinion was framed by the Ministry of Finance in the Protocol between the Ministry of Finance and the Portuguese Public Finance Council, signed on 6 February 2015.
The elaboration of the macroeconomic scenario underlying the NMT-FSP takes place in a context of high uncertainty, particularly external, and which includes, among others, geopolitical tensions, associated with the fragmentation of world trade and armed conflicts, with the potential to introduce new disruptions in global value chains and fuel the rise in the price of energy raw materials, weaken confidence and investment. More recently, the difficulty experienced in the European automotive industry may have repercussions on the Portuguese economy that are not taken into account in the forecasts of the reference institutions, and consequently also not reflected in the external assumptions of this forecasting exercise.
Pursuant to Article 11(2) of Regulation 2024/1263 of the European Parliament and of the Council of 29 April 2024, and taking into account the constraints identified in the analysis of the macroeconomic forecasts underlying the National Medium-Term Fiscal-Structural Plan, the Portuguese Public Finance Council considers the estimates and forecasts for the evolution of real GDP and its deflator as both probable and plausible. The estimates presented for the potential GDP growth rate, as well as for the output gap, do not appear to be consistent with the macroeconomic scenario underlying the NMT-FSP. Therefore:
- Over the entire projection horizon, the projected dynamics for investment do not appear to incorporate the execution profile assumed for the RRP funds. This is particularly evident in 2027, the year in which the significant upward revision compared to that presented in the SP/2024 is not justified by the framework assumptions, particularly the 1.5% drop in GDP in public investment financed by the RRP, whose implementation deadline ends in 2026. In addition, the implementation of the RRP may still change, with a relevant impact on the outlook for domestic demand and for the evolution of the capital stock and, as well as, on the potential growth of the Portuguese economy, due to a potentially lower execution than that assumed by the MF.
- The estimate presented for the output gap shows an upward profile over the projection horizon, and a significantly positive level in 2028. This does not appear to be consistent with the macroeconomic scenario presented in the NMT-FSP. It would be expected that at the end of the projection horizon this gap would converge to values close to zero, which is not the case. The non-availability of additional information for the calculation of potential GDP using the EU Commonly Agreed Methodology (EUCAM), as well as the non-availability of Table 7-A of the NMT-FSP does not allow the recalculation of potential output, and consequently the output gap compatible with the forecast for real GDP and other variables of the macroeconomic scenario. It is recalled that the estimate for the output gap affects the calculation of the cyclically-adjusted budget balances, which are essential in the computation the net expenditure path.
- The preparation of this Opinion was restricted to the elements of the macroeconomic scenario received by the CFP, not covering the assumptions necessary for the calculation of the net expenditure path, since the CFP was not provided with the methodological assumptions used in the calculation of the reference trajectory of net expenditure that will be included in the NMT-FSP. The CFP also did not have access to this trajectory, nor to the reference trajectory. It also did not have access to the identification and quantification of the impact of possible policy measures incorporated into the macroeconomic scenario.
Date of last update: 11/10/2024