{
  "title": "IMF Executive Board Concludes 2022 Article IV Consultation with Portugal",
  "publication": "IMF News, June 30, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/06/30/pr22244-portugal-imf-executive-board-concludes-2022-article-iv-consultation",
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  "summary": "IMF Executive Board Concludes 2022 Article IV Consultation with Portugal",
  "publishDate": "2022-06-30",
  "sections": [
    {
      "heading": "Overview",
      "content": "- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Portugal on Friday, June 23, 2022.\n- Growth in 2021 rebounded to 4.9 percent, driven by private consumption, investment, exports of goods, and gradually recovering tourism.\n- The unemployment rate dropped to pre-pandemic levels on account of rising employment and participation rates.\n- The war in Ukraine is expected to dampen the recovery for the rest of 2022 through a significant deterioration in external demand, higher commodity prices, longer-lasting supply-side disruptions, lower confidence and tighter financial conditions."
    },
    {
      "heading": "Growth, Inflation, and External Sector",
      "content": "- Growth projections:\n  - 2022: 5.8 percent\n  - 2023: 1.9 percent\n- Inflation projections:\n  - 2022: 6.1 percent (projected average)\n  - 2023: 3.5\n- Current account:\n  - The current account deficit is set to widen in 2022, before narrowing over the medium term as exports and tourism strengthen."
    },
    {
      "heading": "Fiscal Outlook",
      "content": "- 2021 headline fiscal deficit: 2.8 percent of GDP (down despite an accommodative fiscal stance).\n- 2022 fiscal deficit: expected to narrow to 2.2 percent of GDP, reflecting the recovery and unwinding of remaining temporary Covid-19 economic support measures.\n- Fiscal stance in 2022: will remain suitably accommodative with measures to mitigate impacts of high energy prices and grant-financed investment supporting the recovery.\n- Public debt: projected to steadily decline to below 100 percent of GDP over the medium term."
    },
    {
      "heading": "Financial Sector and Corporate Sector Risks",
      "content": "- Corporate sector:\n  - Has withstood recent shocks well so far, although solvency gaps are estimated at more than 2 percent of GDP.\n  - Credit quality deterioration after the end of the relatively extensive loan moratoria has yet to fully materialize.\n- Banking sector:\n  - Bank capital, profitability, and asset quality have steadily improved in 2021 but remain below EA averages.\n  - A few legacy domestic banks are still to complete their restructuring process.\n- Real estate:\n  - As in rest of EA, residential real estate prices have risen sharply, though attendant risks appear contained."
    },
    {
      "heading": "Executive Board Assessment and Policy Recommendations",
      "content": "- Directors agreed with the thrust of the staff appraisal and commended the authorities’ comprehensive policy response to the pandemic, including their successful vaccination campaign.\n- Directors' overall guidance:\n  - Strike the right balance between supporting the recovery and rebuilding fiscal buffers and continuing with structural reforms that bolster stronger, more resilient, and private sector-led growth.\n- Fiscal policy recommendations:\n  - Near-term fiscal policy should remain accommodative and better targeted.\n  - Broad-based measures implemented in response to the energy shock should be kept temporary and preferably replaced with more targeted support.\n  - Fiscal policy should remain flexible in 2022, with greater savings if fiscal outcomes overperform.\n  - Pursue a gradual and growth-friendly fiscal consolidation starting from 2023 to rebuild fiscal space for future shocks, address long-term ageing pressures, and mitigate public debt risks.\n  - In particular: reduce tax expenditures, enhance pension sustainability, and strengthen public financial management.\n- Financial sector recommendations:\n  - Carefully monitor risks and maintain close vigilance of banks’ asset quality.\n  - Further strengthen banks’ capital buffers.\n  - Continue monitoring risks from rising house prices.\n  - Strengthen corporate debt restructuring frameworks and further improve the insolvency regime.\n  - Encourage prompt private-led recapitalization of viable firms to mitigate corporate debt overhang risks, smooth resource reallocation, and limit scarring.\n- Structural reforms and investment:\n  - Welcome the authorities’ comprehensive structural reform and investment agenda anchored in the National Recovery and Resilience Plan (NRRP).\n  - Emphasize the need for efficient implementation and oversight to maintain strong investment absorption capacity and maintain the reform momentum.\n  - Underscore the potential of the NRRP to raise skill levels, digitalization, productivity, and living standards durably.\n  - Call for complementary reforms to address labor market duality and reduce youth unemployment.\n  - Commend the authorities’ ambitious targets and policies to address climate change challenges.\n  - See merit in considering further increasing the carbon price—once the energy crisis subsides—while protecting the most vulnerable households."
    },
    {
      "heading": "Key Statistics and Projections (Portugal: Selected Economic Indicators, 2020–23)",
      "content": "- Real GDP (Year-on-year percent change)\n  - 2020: -8.4\n  - 2021: 4.9\n  - 2022: 5.8\n  - 2023: 1.9\n- Private consumption (Year-on-year percent change)\n  - 2020: -7.1\n  - 2021: 4.5\n  - 2022: 3.4\n  - 2023: 2.0\n- Public consumption (Year-on-year percent change)\n  - 2020: 0.4\n  - 2021: 4.1\n  - 2022: 1.3\n  - 2023: 1.2\n- Gross fixed capital formation (Year-on-year percent change)\n  - 2020: -2.7\n  - 2021: 6.5\n  - 2022: 5.9\n- Exports (Year-on-year percent change)\n  - 2020: -18.6\n  - 2021: 13.1\n  - 2022: 7.2\n  - 2023: 2.5\n- Imports (Year-on-year percent change)\n  - 2020: -12.1\n  - 2021: 1.7\n- Contribution to growth (Percentage points)\n  - Total domestic demand\n    - 2020: -5.5\n    - 2021: 5.2\n    - 2022: 3.5\n  - Foreign balance\n    - 2020: -2.9\n    - 2021: -0.3\n    - 2022: 2.2\n    - 2023: 0.2\n- Resource utilization\n  - Employment (Year-on-year percent change)\n    - 2021: 0.8\n  - Unemployment rate (Percent)\n    - 2020: 7.1\n    - 2021: 6.6\n    - 2022: 6.4\n- Prices\n  - GDP deflator\n    - 2020: 0.7\n    - 2021: 6.0\n    - 2022: 3.1\n  - Consumer prices (Harmonized index)\n    - 2020: -0.1\n    - 2021: 0.9\n    - 2022: 6.1\n- Fiscal indicators (Percent of GDP)\n  - General government balance\n    - 2020: -5.8\n    - 2021: -2.8\n    - 2022: -2.2\n    - 2023: -1.0\n  - Primary government balance\n    - 2020: -3.1\n    - 2021: -0.5\n    - 2022: 1.0\n  - Structural primary balance (Percent of potential GDP)\n    - 2021: 1.6\n  - General government debt\n    - 2020: 135.2\n    - 2021: 127.4\n    - 2022: 115.8\n    - 2023: 110.7\n- Current account balance (Percent of GDP)\n  - 2020: -1.1\n  - 2021: -1.3\n- Nominal GDP (Billions of euros)\n  - 2020: 200.1\n  - 2021: 211.3\n  - 2022: 237.1\n  - 2023: 249.3\n\nIMF Executive Board Concludes 2022 Article IV Consultation with Portugal, Press Release No. 22/244, June 30, 2022.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Portugal and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/06/30/pr22244-portugal-imf-executive-board-concludes-2022-article-iv-consultation"
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    "Published: June 30, 2022",
    "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Portugal on Friday, June 23, 2022.",
    "Growth in 2021 rebounded to 4.9 percent, driven by private consumption, investment, exports of goods, and gradually recovering tourism.",
    "The unemployment rate dropped to pre-pandemic levels on account of rising employment and participation rates.",
    "The war in Ukraine is expected to dampen the recovery for the rest of 2022 through a significant deterioration in external demand, higher commodity prices, longer-lasting supply-side disruptions, lower confidence and tighter financial conditions.",
    "Growth projections:",
    "Inflation projections:",
    "Current account:",
    "2021 headline fiscal deficit: 2.8 percent of GDP (down despite an accommodative fiscal stance).",
    "2022 fiscal deficit: expected to narrow to 2.2 percent of GDP, reflecting the recovery and unwinding of remaining temporary Covid-19 economic support measures.",
    "Fiscal stance in 2022: will remain suitably accommodative with measures to mitigate impacts of high energy prices and grant-financed investment supporting the recovery.",
    "Public debt: projected to steadily decline to below 100 percent of GDP over the medium term.",
    "Corporate sector:",
    "Banking sector:",
    "Real estate:",
    "Directors agreed with the thrust of the staff appraisal and commended the authorities’ comprehensive policy response to the pandemic, including their successful vaccination campaign.",
    "Directors' overall guidance:",
    "Fiscal policy recommendations:",
    "Financial sector recommendations:",
    "Structural reforms and investment:",
    "Real GDP (Year-on-year percent change)",
    "Private consumption (Year-on-year percent change)",
    "Public consumption (Year-on-year percent change)",
    "Gross fixed capital formation (Year-on-year percent change)",
    "Exports (Year-on-year percent change)",
    "Imports (Year-on-year percent change)",
    "Contribution to growth (Percentage points)",
    "Resource utilization",
    "Prices",
    "Fiscal indicators (Percent of GDP)",
    "Current account balance (Percent of GDP)",
    "Nominal GDP (Billions of euros)",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Portugal and the IMF](http://www.imf.org/external/country/PRT/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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