{
  "title": "IMF Executive Board Concludes 2023 Article IV Consultation with Portugal",
  "publication": "IMF News, June 22, 2023",
  "sourceUrl": "https://www.imf.org/en/news/articles/2023/06/21/pr23225-portugal-imf-exec-board-concludes-2023-art-iv-consult",
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  "summary": "The economy sustained its dynamic recovery from the pandemic into 2022. GDP surpassed the pre-pandemic level in the first quarter and growth averaged 6.7 percent for the year—among the highest in the euro area. The momentum continued through early 2023 with growth at 2.",
  "publishDate": "2023-06-22",
  "sections": [
    {
      "heading": "Macroeconomic performance and near-term outlook",
      "content": "- GDP surpassed the pre-pandemic level in the first quarter of 2022 and growth averaged 6.7 percent for 2022.\n- Growth in Q1 2023 was 2.5 percent (year-on-year).\n- Growth projections:\n  - 2023: 2.6 percent\n  - 2024: 1.8 percent\n- Inflation dynamics:\n  - Headline inflation peaked in late 2022; core inflation has been stickier due to limited slack, high profit margins, and tight labor markets.\n  - Inflation is expected to continue to ease over 2023 but remain above 2 percent in the near term.\n- Labor market and wages:\n  - Wage growth has accelerated, partly reflecting minimum wage hikes and labor shortages.\n- External sector:\n  - Current account deficit is expected to narrow as terms-of-trade normalize and external demand strengthens."
    },
    {
      "heading": "Fiscal outcomes and public debt",
      "content": "- Fiscal outcomes:\n  - Fiscal deficit narrowed to 0.4 percent of GDP in 2022, despite new fiscal support measures, mainly reflecting stronger tax revenues.\n  - Fiscal position in 2023 is expected to be broadly similar to 2022.\n- Public debt:\n  - Public debt fell below its pre-pandemic level to 113.9 percent of GDP in 2022.\n  - Public debt is set to remain on a downward path in 2023 and over the medium term.\n- Fiscal policy stance and guidance:\n  - Maintaining a contractionary fiscal policy stance in 2023 is appropriate to build fiscal space and support monetary policy in reducing inflation pressures.\n  - If growth weakens appreciably, automatic stabilizers should be fully deployed; fiscal overperformance must be saved.\n  - Further fiscal support should be reserved only for severe downside scenarios and designed to be temporary, non-price-distortionary, and targeted to the most vulnerable households.\n- Medium-term fiscal reform priorities:\n  - Revenue-side: simplifying the tax system and eliminating tax distortions, rolling back reduced VAT rates, reinstating carbon taxes, and improving tax administration.\n  - Expenditure-side: reforms to contain age-related spending pressures from pensions and health care; increase the share of public investment relative to current spending.\n  - Other: strengthen the medium-term budgetary framework, strengthen the financial sustainability of SOEs, and further improve the social safety net."
    },
    {
      "heading": "Financial sector and housing risks",
      "content": "- Resilience:\n  - The banking system and household and corporate sectors have been resilient to recent shocks so far.\n- Emerging risks:\n  - Tighter financial conditions, amid a buoyant housing market, have increased financial risks.\n- Recommended financial sector actions:\n  - Banks and supervisors should maintain vigilance on credit quality, market and interest rate risk, and liquidity management.\n  - Continuously improving capital headroom is an important safeguard.\n  - Efforts to contain risks from transnational money laundering should continue.\n- Residential real estate measures:\n  - Consider gradually phasing in a sectoral systemic risk capital buffer, holistically calibrated with other macroprudential measures, resolvability cost considerations, and procyclicality avoidance.\n  - Support housing supply and affordability without generating market distortions to alleviate housing market strains."
    },
    {
      "heading": "Structural reforms and investment absorption",
      "content": "- Productivity and reforms:\n  - Structural policies should focus on boosting productivity growth.\n  - Timely implementation of the NRRP is crucial; NRRP focuses on raising R&D, improving the education system, judicial system and business regulations, and scaling up green investment.\n- Labor market:\n  - Reforms to improve labor market performance and dynamism, supported by active labor market policies and skilling and re-skilling workers, would spur private sector-driven growth.\n- Carbon pricing:\n  - Receding energy prices provide an opportunity to gradually increase carbon taxes, combined with targeted measures to protect the most vulnerable.\n- EU funds:\n  - Efficient planning, budgeting, implementation, and oversight are key to maintaining strong investment absorption capacity of EU funds."
    },
    {
      "heading": "Risks and scenarios",
      "content": "- Downside risks:\n  - Tighter financial conditions potentially accompanied by a sharp correction in housing prices.\n  - A deeper global or regional slowdown.\n  - Persistently higher energy prices.\n- Upside risks:\n  - Continued strong tourism momentum and a resilient labor market."
    },
    {
      "heading": "Key statistics — Portugal: Selected Economic Indicators (Year-on-year percent change, unless otherwise indicated)",
      "content": "- Real GDP:\n  - 2021: 5.5\n  - 2022: 6.7\n  - 2023 (Projection): 2.6\n- Private consumption:\n  - 2021: 4.7\n  - 2022: 5.8\n  - 2023 (Projection): 1.0\n- Public consumption:\n  - 2021: 4.6\n  - 2022: 1.7\n  - 2023 (Projection): 3.0\n- Gross fixed investment:\n  - 2021: 8.7\n  - 2022: 4.3\n  - 2023 (Projection): (not listed)\n- Exports:\n  - 2021: 13.4\n  - 2022: 16.7\n  - 2023 (Projection): 4.4\n- Imports:\n  - 2021: 13.2\n  - 2022: 11.1\n  - 2023 (Projection): 2.8\n- Contribution to Growth (Percentage points):\n  - Total domestic demand:\n    - 2021: 1.9\n    - 2022: (not listed)\n    - 2023 (Projection): (not listed)\n  - Foreign balance:\n    - 2021: -0.3\n    - 2022: 2.0\n    - 2023 (Projection): 0.7\n- Resource utilization:\n  - Employment:\n    - 2021: 2.1\n    - 2022: (not listed)\n  - Unemployment rate (Percent):\n    - 2021: 6.6\n    - 2022: 6.0\n- Prices:\n  - GDP deflator:\n    - 2021: 1.5\n    - 2022: 4.0\n  - Consumer prices (Harmonized index):\n    - 2021: 0.9\n    - 2022: 8.1\n    - 2023 (Projection): 5.6\n- Fiscal indicators (Percent of GDP):\n  - General government balance:\n    - 2021: -2.9\n    - 2022: -0.4\n  - Primary government balance:\n    - 2021: -0.6\n    - 2022: 1.4\n    - 2023 (Projection): 1.8\n  - Structural primary balance (percent of potential GDP):\n    - 2021: 0.6\n    - 2022: 1.2\n  - General government debt:\n    - 2021: 125.4\n    - 2022: 113.9\n    - 2023 (Projection): 107.9\n- Current account balance:\n  - 2021: -0.8\n  - 2022: -1.3\n- Nominal GDP (Billions of euros):\n  - 2021: 214.7\n  - 2022: 239.3\n  - 2023 (Projection): 255.3\n\nSource: IMF — IMF Executive Board Concludes 2023 Article IV Consultation with Portugal.\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/2023/06/21/pr23225-portugal-imf-exec-board-concludes-2023-art-iv-consult"
    }
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    "Published: June 22, 2023",
    "GDP surpassed the pre-pandemic level in the first quarter of 2022 and growth averaged 6.7 percent for 2022.",
    "Growth in Q1 2023 was 2.5 percent (year-on-year).",
    "Growth projections:",
    "Inflation dynamics:",
    "Labor market and wages:",
    "External sector:",
    "Fiscal outcomes:",
    "Public debt:",
    "Fiscal policy stance and guidance:",
    "Medium-term fiscal reform priorities:",
    "Resilience:",
    "Emerging risks:",
    "Recommended financial sector actions:",
    "Residential real estate measures:",
    "Productivity and reforms:",
    "Labor market:",
    "Carbon pricing:",
    "EU funds:",
    "Downside risks:",
    "Upside risks:",
    "Real GDP:",
    "Private consumption:",
    "Public consumption:",
    "Gross fixed investment:",
    "Exports:",
    "Imports:",
    "Contribution to Growth (Percentage points):",
    "Resource utilization:",
    "Prices:",
    "Fiscal indicators (Percent of GDP):",
    "Current account balance:",
    "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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