Portugal: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Portugal

IMF Staff Country Reports, June 30, 2022

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Canonical URL: Portugal: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Portugal

After a deeper pandemic-induced recession than the rest of the euro area in 2020, the Portuguese economy gained ground in 2021, and growth strengthened further in 2022:Q1.
The 2022 budget remains suitably accommodative, excluding the appropriate unwinding of coronavirus disease 2019 measures.
Broad-based measures in response to the energy price shock must be kept temporary and preferably replaced with more targeted measures to mitigate the impact on vulnerable households.
A timely implementation of the National Recovery and Resilience Plan through efficient and transparent planning and budgeting, organization and oversight of the investments and reforms would limit scarring, raise living standards, and build a more dynamic economy.
Reforms to reduce labor market duality and strengthen insolvency regimes would support the transition to private-led growth and increase resilience.

Balance short-term urgencies with a smooth transition to private-led growth, rebuilding fiscal space and advancing reforms for stronger growth and a more resilient economy.
Keep broad-based energy-price related measures temporary and preferably replace them with more targeted support for vulnerable households.
Ensure fiscal policy flexibility to provide further support under severe adverse scenarios or to generate more savings under fiscal over performance.
Implement the National Recovery and Resilience Plan in a timely manner via efficient and transparent planning and budgeting, and strengthened organization and oversight of investments and reforms.
Advance reforms to reduce labor market duality and strengthen insolvency regimes to limit scarring and raise living standards.

Fiscal policy should remain flexible to allow:
- further support if severe adverse scenarios materialize, and
- additional fiscal savings if there is fiscal over performance.
The unwinding of coronavirus disease 2019 measures should be appropriately managed while keeping the 2022 budget suitably accommodative.

Timely and transparent execution of the National Recovery and Resilience Plan, emphasizing:
- efficient planning and budgeting,
- organization and oversight of investments and reforms.
Structural reforms to:
- reduce labor market duality, and
- strengthen insolvency regimes to support a more dynamic private sector.

Portugal: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Portugal