State Budget 2019’s macroeconomic framework
The macroeconomic framework in the context of the State Budget 2019 is looking at a GDP growth of 2.2%, 0.1% below 2018's level, a 6.3% unemployment rate, and a deficit of 0.2%.
Despite the downward review of the GDP growth, the government is still more optimistic than some of its peer institutions. The IMF indicates a 1.8% GDP growth, whereas the Public Finances Council expected the GDP to grow by 1.9%.
In fact, all institutions are anticipating a slowing down of the economy, although they do not agree on the rhythm of deceleration. However, the government is expecting the job market conditions to improve next year, with the unemployment rate going down to 6.3%, which is in line with all other organization’s estimates. The IMF, for instance, is expecting unemployment to go down from 7 to 6.7% between 2018 and 2019.
In terms of budget, in 2019 the government expects to hit the lowest deficit ever since the country became a democracy, maintaining the target of 0.7% for the current year, and of 0.2% for next year, getting very close to the break-even point.
The 0.7% deficit target already encompasses the €732m that the state injected in Novo Banco over the first half of the year, and the target for the next year, of 0.2% is haunted by the prospect of a new injection of capital into that same bank next year, which can go up to €726m.
IMF is expecting the deficit to reach 0.3% of GDP.
