War prompts IMF to cut Portugal’s growth forecast to 4%

The International Monetary Fund (IMF) published on Tuesday its projections in the World Economic Outlook, having revised downwards the recent global growth estimates due to the negative effects of the war in Ukraine.

For Portugal, the Washington-based institution forecast growth of 4% this year and 2.1% in 2023. These figures represent a sharp downward revision as in October, the IMF projected a 5.1% increase in GDP for this year.

The new forecast of 4% for 2022 is more pessimistic than the Government’s. In the Stability Programme delivered in Brussels, João Leão, the former Finance Minister, pointed to a growth rate of 5% for this year, a figure that has since been revised downwards to 4.9% by the new Finance Minister Fernando Medina in the State Budget proposal delivered to Parliament last week.

The Bank of Portugal (4.9%) and the Public Finance Council (4.8%) also have more optimistic forecasts for the Portuguese economy.

Justifying this greater IMF pessimism is the war in Ukraine that led the institution led by Kristalina Georgieva to lower global growth estimates. “Beyond the immediate humanitarian impacts, the war will severely set back the global recovery, slow- ing growth and increasing inflation even further,” reads the World Economic Outlook.

For this year and 2023, the IMF forecasts that the world economy will grow by 3.6%, a downward revision of 0.8% and 0.2%, respectively, compared to estimates made in January, before the war.

“This downward revision largely reflects the direct impact of the war in Ukraine and Russia and the global contagion effects” on the other economies, explains Pierre-Olivier Gourinchas, the IMF’s chief research officer.

For Ukraine, IMF forecasts for this year point to a GDP collapse of 35%, while the Russian economy is expected to sink by 8.5% over the same period.