Public investment rises to 2.5% of Portugal’s GDP

  • ECO News
  • 1 July 2020

The increase in public investment predicted by the government and the economy's fall will bring the indicator's ratio to 2.5% of GDP, the highest figure since 2012.

Public investment is expected to grow 24.6% this year and the economy will contract 6.9%. According to the Supplementary disclosed this Wednesday by the Public Finance Council, the weight of public investment will benefit from these two developments and reach 2.5% of GDP, the highest value since 2012.

In the Supplementary Budget, gross fixed capital formation (GFCF), the technical name for public investment, was increased by only 34 million euros when compared to the 2020 State Budget. However, the variation of public investment in the Supplementary Budget ends up being more expressive compared to last year, corresponding to an additional 188 million euros.

Thus, according to the Supplementary, public investment “should reach 4,959 million euros this year, 979 million more than in 2019,” estimates the CFP.

As GDP will fall, the share of public investment benefits not only from the increase in this component but also from the fall in the denominator, bringing the ratio to 2.5% of GDP in 2020, 0.6 percentage points higher than in 2019 and the highest value since 2012.

However, the Public Finance Council leaves a warning, recalling the past: “Although it is worth pointing out the aforementioned expected acceleration of GFCF growth, it is recalled once again that in recent years this expenditure has fallen well short of expectations.”