The head of mission of the International Monetary Fund (IMF) for Portugal considers that the changes to the initial version of the IRS Jovem go in the right direction and defended the end of subsidies for fossil fuels. Jean-François Dauphin also praised the “extraordinary work” done by governments since the financial assistance program (2011-2014), but stressed that productivity, investment and aging populations are threats on the horizon.

“The revised version of IRS Jovem is going in the right direction because it is less expensive and, for that reason, we appreciate the effort,” he said Jean-François Dauphin in an interview with the Lusa agency in Washington, on the sidelines of the annual meetings of the IMF and the World Bank, which ended this weekend. Despite the agreement with the new model negotiated between the Government and the Socialist Party (PS), the IMF continues to consider that the underlying issue – motivating young people to stay in Portugal instead of emigrating – must be addressed from a more comprehensive and not specific. budgetary measures.

“The measure is expensive and we are not sure it will be effective. Therefore, we encourage the Government to think twice, because the way we see the issue that it is trying to solve, which is the emigration of the young population, a valid concern, is that the way of addressing the issue has to be more comprehensive. , and is to bring living standards to the euro zone average,” the official said, adding that “the effort must be to increase productivity and make the economy grow faster, converging to the euro zone average.” , stated the French economist who heads the IMF Mission to Portugal.

After negotiations with the PS, the Government modified its initial IRS Jovem proposal, reducing its budgetary impact from one billion euros to 525 million euros.

IRS Jovem will cost 525 million in the new model proposed by the Government

In the interview given to Lusa, Jean-François Dauphin also defended the end of fuel subsidiesfirstly for a budgetary issue, and secondly because the IMF considers that this type of support does not differentiate between those who need it and those who do not.

When we look at the State Budget for 2025, we recommend gradually increasing public investment, but it is difficult because the issue is finding space within the financial envelope to have more investment and, therefore, we recommend looking at the exemptions included in the tax system. , which are there for good reasons, but we have to see if they are effective and evaluate the relationship between cost and benefit,” said the economist.

Asked what measures, specifically, should be changed in the tax system, Dauphin pointed to VAT, the IRS and the IRC, highlighting that “the cost of exemptions is equivalent to 6% of GDP, while the average in the euro zone is 4%, therefore, by reducing tax exemptions to the eurozone average there is a margin of 2 percentage points to increase investment without influencing the budget result”, which the IMF classifies as “a small surplus that is appropriate ”.

When asked to indicate what changes should be made to taxes, the head of the Fund’s mission in Portugal said that there is a unit in the Ministry of Finance that will do precisely this work and again pointed to the elimination of fuel subsidies .

“Fossil fuel energy must be priced appropriately and subsidies encourage consumption of what we want to reduce; Furthermore, they are regressive measures, that is, Euro benefits from subsidies cost the rich less than the poorest“argues the economist.

Portugal, he continued, “is very ambitious in terms of climate transition,” and the Fund supports the goal, but not the way to get there: “These subsidies not only create obstacles to the climate transition, but are also unfair, so that we should They argue that it is a good idea to reduce them.” The Government unfreezes the carbon tax update this year, but there is still a discount in relation to the ISP that has not been reversed.

For the IMF, it would be more productive to “design direct support for the most needy families,” instead of a subsidy that reaches everyone equally.

Portugal has done “extraordinary work” since the troika program

The head of mission of the International Monetary Fund (IMF) also praised the economic trajectory of recent years, listing low productivity and investment, along with an aging population, as the biggest challenges.

“Since 2019, Portugal’s average growth has been double the eurozone average, therefore, It’s an impressive performance.“said Jean-François Dauphin in an interview with the Lusa agency in Washington.

Part of the performance of the Portuguese economy is related to the consequences of the pandemic, which increased accumulated savings and the desire to travel. This, “in a context in which labor markets resisted very well, boosting consumption, and investment was facilitated by European funds, with absorption being faster in Portugal than in other countries.”

Portugal, in particular, benefits from the increase in tourism, “which is here to stay and is the result of the country’s attractiveness. But the question is how to harness some of the gains underlying this performance so that Portugal can grow faster and converge more quickly with the European Union in terms of living standards and income.”

The country, said Jean-François Dauphin, has improved a lot in terms of training and education, “but We need to consider more comprehensive measures to increase productivity.make the business environment easier and with less bureaucracy, and facilitate Slightly more flexible labor market.“.

Asked about the main threats to Portugal’s economic growth, which the IMF estimates at around 2% this year and next, the French economist listed elements common to Europe, such as the increase in geopolitical tensions and sudden variations in commodity prices. the raw materials. , increase pressure on inflation. But he highlighted that Portugal also has specific threats.

In general, Portugal faces low productivity, an insufficient level of public investment and an aging population, and the key to ensuring that the economy continues to grow is to address these three points,” said the French economist, also responsible for Belgium. and Bulgaria in the European department of the IMF.

After the approval of the “very difficult” financial adjustment program at the beginning of the last decade, Portugal “did an extraordinary job”, which turns out to be an impressive figure, added: “Since the Covid-19 pandemic, public debt as a function of GDP has fallen by more than 35 percentage points, which is extraordinary and almost unique in Europe, and is a testament of “The great consensus among political leaders, and I believe also among the population, on the importance of budgetary responsibility.”