Analyst warns forecasting could be ‘over optimistic’
With minority parties bristling with indignation over the government’s proposals for the State Budget, the right-of-centre coalition has said it expects the economy to grow by 2.0% both in 2024 and 2025 – projecting public sector budget surpluses equivalent to 0.3% of gross domestic product this year and 0.2% next.
The figures appear in documents being passed to the parties with seats in parliament by the government at meetings on the draft State Budget for 2025 taking place today.
These documents also include a projection for inflation of just over 2%.
The 2% figure for economic growth in 2024 is slightly higher than previously projected – the Stability Programme submitted to the European Commission earlier this year had pointed to 1.5% and 1.9% for this year and next – but is in line with what the minister of finance, Joaquim Miranda Sarmento, has said publicly.
On the revenue side, the government’s macroeconomic scenario estimates that this will grow by between 4.0% and 4.5% each year.
On the other hand, primary current expenditure – that is, excluding the portion relating to debt servicing – is expected to grow at a faster rate this year than in 2025. The government’s projection thus points to spending growth of 8% in 2024, while in 2025 it projects growth of between 4% and 5%.
The same documents estimate that interest costs on public debt will increase by €500 million this year from last, and rise by another €300 million in 2025.
The budget projection included in the macroeconomic scenario being presented to the parties points to a surplus of 0.3% of GDP this year and slightly less, at 0.2% in 2025 – a year that will already see the impact of legislation to reduce some taxes and tolls approved with votes of the opposition, which is in the majority in parliament.
The government must submit its budget bill to parliament by October 10, adds Lusa.
Meantime, over at SIC Notícias, analyst José Gomes Ferreira has been looking at the figures and shaking his head. “The expenditure structure will not hold up and we will return to deficits” if the “negative international climate hits Portugal even harder” than it is already, he warns.
Echoing president Marcelo’s exhortations recently to Portugal’s young people to ‘look at what is happening abroad’, Gomes Ferreira referred to the “possible recession in Germany and prolonged stagnation in the heart of Europe” which could well prevent the Portuguese government from achieving its economic forecasts for 2024 and 2025.
In addition to Germany’s economic woes, France “isn’t doing any better – and the UK is practically stagnating”, he said – which means that “sooner or later, Portugal is going to have to face up to this negative international climate”.
With all the clamour today of the State Budget (minority parties fiercely condemning it) José Gomes Ferreira doesn’t believe that the government will fall if the State Budget isn’t approved, stressing that president Marcelo “has already given signs that he certainly won’t want to dissolve parliament”.
Political commentator Luís Marques Mendes explained why during his weekly Sunday night slot on SIC: a dissolution of parliament and new elections would see next year with legislative elections, municipal elections and then the run-up to presidential elections (taking place in January 2026). It would just be too ‘mad’, expensive and ultimately of no help to the country.
Very much as political commentators have predicted in the past, all the fuss being made by minority parties about the State Budget is just that: ‘fuss’/ noise. It won’t succeed in bringing this precariously-placed government down, as no-one would ‘win’, least of all the citizens of this country.
