IMF Staff Country Reports

This 2023 Article IV Consultation with Portugal discusses that the economy sustained its dynamic recovery from the pandemic into 2022. Growth is projected to soften for the rest of the year to average 2.6 percent in 2023 and 1.8 percent in 2024. Inflation is expected to continue to ease over 2023 but remain above 2 percent in the near term. The current account deficit is expected to narrow as terms-of-trade normalize and external demand strengthens. The banking system and household and corporate sectors have been resilient to recent shocks so far. However, tighter financial conditions, amid a buoyant housing market, have increased financial risks. A stronger medium-term fiscal effort relative to the baseline, comprising both revenue and expenditure measures, would build fiscal space and mitigate debt-related risks further and improve resilience to contingency risks. Structural policies should continue focusing on boosting productivity growth.