Finance Minister says Portuguese economy is “slightly better than expected”

Finance Minister João Leão considers that the behaviour of the Portuguese economy has been “slightly better than expected,” mentioning the resilience of the income tax revenues and employment figures. In an interview with Reuters on Thursday, Leão also expressed confidence that Portugal had met its deficit target of only 7.3% in 2020.

The minister’s statement that the economy is performing “slightly better than expected” could mean that, in the Finance Ministry’s calculations, GDP will contract less in 2020 than the 8.5% forecast in the 2021 state budget. The final figure will only be known in early February when the National Institute of Statistics (INE) reveals GDP’s flash estimate. The expectation for 2021 is that the economy will recover by 5.4%.

On the side of the public finances, the minister said he had managed to meet the target of 7.3% of GDP last year, despite a significant increase in expenditure and a drop in revenue due to the pandemic crisis. The target for 2021 is to reduce the budget deficit to 4.3% of GDP.

In the same interview, the minister argued that the European Union’s flexible budget rules should remain in place until 2022: “We should not withdraw the exceptional rules … too early.”

Now the focus is on the implementation of the EU’s recovery fund, which will have to be managed by the Portuguese Presidency of the Council of the European Union. “The main priority of the Portuguese presidency is to achieve a fast and strong economic recovery, that’s absolutely key for Europe,” assured the Finance Minister, arguing that the process should be “as smooth and fast as possible.”

“The challenge is for countries to implement this concretely, sometimes it takes time,” he admitted, warning that “It is important that EU countries are aware of the need to starting planning right now.” The Portuguese Presidency’s goal is that by the end of June there will be National Recovery and Resilience Plans examined by the European Commission and approved by the European Council, ready to be implemented in the respective Member States.

On monetary policy, the Finance Minister argues that the ECB should continue to provide “stability and makes sure that the monetary conditions are spread to all countries, so that all countries could benefit from good monetary conditions that will support growth.”