State expects Recovery Plan to help economy grow another half percentage point in 2021
In the plan delivered in Brussels, the Portuguese government estimates the impact on the economy through investment support measures, public and private.
The Portuguese Resilience and Recovery Plan (PRR) should have a positive impact of 0.4 percentage points on the country’s GDP already next year. This is the estimate that the government has included in the document that prime minister António Costa delivered this Thursday in Brussels to the President of the European Commission, Ursula Von der Leyen.
“Public and private investment support measures play a crucial role in the economy’s recovery, enabling investment and the maintenance and creation of jobs, boosting economic growth which, without these measures, would have been 0.4 p.p. lower already in 2021. The virtuous effect of the PRR is visible in the annual growth rates throughout the projection exercise. It also translates into important gains in the unemployment rate, which, without the impulse of the PRR measures, would not return, in the projection horizon, to the pre-pandemic values. Finally, it also promotes better fiscal performance, with a reduction in the deficits forecast for the period under consideration,” according to the government in the document that ECO had access to.
Due to the pandemic, the Portuguese economy contracted 2.3% in the first quarter, before sinking 16.3% in the second quarter. For the whole year, the government estimates a recession of 8.5%, below the Eurozone average (-8.7%), and a worsening of unemployment to 8.7%.
“The year 2021 should mark a turning point for a period of recovery, with an expected GDP growth of 5.4% and a reduction in the unemployment rate of 0.5 p.p., reflecting the support measures promoted by the government and the implementation of the different instruments foreseen, including in the context of the Recovery and Resilience Plan,” the report says.
In addition to the direct impact on the economy, the government also argues that the plan boosts a better fiscal performance, “with a reduction in the deficits forecast for the period considered,” it says. As for public accounts, the State Budget forecast points to a deficit of 4.3% in 2021, after a negative balance of 7.3% this year.
