Government cuts GDP growth to 4.9%
The Government's new macroeconomic scenario lowers the GDP forecast for 2022 from 5% to 4.9%, matching the Bank of Portugal's predictions.
In just two weeks, the Government has updated the macroeconomic scenario, changing the numbers presented in the 2022-2026 Stability Programme. In the draft State Budget for 2022 (OE 2022) delivered this Wednesday, the Finance Ministry revises downwards the growth of the Portuguese economy from 5% to 4.9% and increases the projected inflation rate to 4% in 2022.
If this rate of growth is achieved, the Portuguese economy will maintain the dynamism of 2021 when GDP also grew by 4.9%. Regarding the inflation rate, the new forecast represents a strong acceleration from the 0.9% registered in 2021, which results from the increase in energy prices, a phenomenon aggravated by the Russian invasion of Ukraine.
The forecast for the Budget deficit remains at 1.9%, as announced a fortnight ago, shrinking from 2.8% of GDP in 2021. With the economy growing and the deficit falling, the public debt ratio drops to 120.7% of GDP, one-tenth less than the government’s previous forecast. The unemployment rate is expected to fall to 6%, after having fallen to 6.6% in 2021.
It should be noted that the weight of interest expenditure on public debt is expected to fall to 2.2% of GDP, less than the 2.4% of GDP in 2021, even with the start of the normalisation of monetary policy by the European Central Bank. The implicit interest rate on Portuguese public debt will remain at 1.9%.
