Portugal should now have a “less restrictive budget policy“, considers the OECD, one of the factors that lead the organization to improve the growth prospects of the national economy. oh Gross domestic product (GDP) is expected to increase by 1.6%. in this year 2024, more than the 1.2% estimated by the same OECD in November, accelerating next year to 2%.
The new forecasts are contained in the economic outlook report published this Thursday by the Organization for Economic Cooperation and Development (OECD). In short, the organization foresees that the increase in public investment, the reduction of taxes and the increase in social benefits will be factors that will sustain the growth of the Portuguese economy.
In November, the OECD had forecast 1.2% growth in 2024 and, by 2025, a 2% increase in Portuguese economic output. The new projection, of 1.6% growth, is slightly higher than the 1.5% forecast by the Government in the stability program launched last month (in a scenario of invariant policies) and is in line with the 1.6 % projected by the Public Finance Council. . The most optimistic forecast for economic growth this year is that of the Bank of Portugal: 2% in 2024 and 2.3% in 2025.
The economy will grow much more than expected, predicts the Bank of Portugal. GDP should increase 2% this year
The OECD expectation is that wages (real, that is, excluding inflation) boost private consumption, in a context marked by a decrease in inflation and a labor market where there is a lot of demand and, therefore, low levels of unemployment. On the other hand, the execution of the Recovery and Resilience Plan (PRR) funds will boost investment, another component of the GDP calculation, believes the OECD.
At this stage, exports and investments are being penalized by low global growth rates, including in some of Portugal’s important trading partners, “but this headwind will improve as external demand strengthens,” he says. the OECD, highlighting that it anticipates that “Fiscal policy will be less restrictive.” – specifically, a trend is expected towards “reductions in personal income tax and increases in social benefits.”
Public debt, according to the OECD, is expected to “decrease further”, to a level below 93% of GDP in 2025. The organization highlights that “more efficient spending and a strengthened budget framework would help to cope with the growing spending pressures related to an aging population and strong long-term investment needs.”
Source: Observadora
