Portugal sent the draft State Budget for next year to the Commission on Tuesday. Without new measures, the government sees GDP accelerating to 2%.
The Government sees the economy growing 1.9% this year and the Budget with a better deficit of 0.1% of GDP. For 2020, the Government aims for a GDP to accelerate to 2%. The new goals, which were assumed Tuesday with the European Commission, reflect the impact of the new base of national accounts, but do not yet include the measures that the Government wants to include in the State Budget and whose support will still have to negotiate with the parties on its left.
In the Stability Programme, the Ministry of Finance assumed a GDP growth forecast of 1.9% and a deficit of 0.2% of GDP. For 2020, Mário Centeno’s forecasts were for a GDP increase of 1.9% and a budget surplus of 0.3% of GDP. But in the draft published this Wednesday, Centeno updated the objectives.
Since then, Mario Centeno has had good news. The National Statistics Institute (INE) reviewed the basis of national accounts, with positive implications on both fronts: economic growth in the first half of the year was 2% and not 1.8% and 2018 finally closed with a deficit of 0.4% of GDP, a tenth better than expected.
The Minister of Finance admitted that the revision of the INE could result in a slightly lower deficit this year compared to the 0.2% of GDP forecast by the Executive. In addition, it has already seen three institutions revise upwards the economic growth forecast for this year, approaching its projection, in contrast with the downward revision trend of forecasts for the world economy.
However, the Government chose to be cautious and not improve the GDP forecast for this year. “The macroeconomic scenario underlying the Draft Budgetary Plan for 2020 maintains the projection of 1.9% for the real growth of Gross Domestic Product (GDP) in 2019, as stated in the Stability Programme 2019-2023, published in April this year.
For next year, the Government foresees an economic acceleration, reversing the slowdown trend recorded since 2018 and the trajectory drawn in the April Stability Programme, which pointed to a stabilization.
“For 2020, the macroeconomic scenario underlying the Draft Budgetary Plan foresees a slight acceleration of GDP growth to 2%. This projection is based on the anticipation of a recovery of economic growth in the euro area, in line with the forecasts of international institutions, such as the International Monetary Fund”, explains the Ministry of Finance.