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“A moment with challenges.”  The Bank of Portugal expects the budget surplus to decline

“A moment with challenges.” The Bank of Portugal expects the budget surplus to decline

The Bank of Portugal (BdP) maintained its economic growth forecast at 2% this year, the same value expected in March. It is also estimated that the unemployment rate will remain at 6.6 percent.

As for budget forecasts, The Bank of Portugal estimates that “the budget balance is expected to deteriorate in the coming years” and that in 2024 it will remain at one percent of GDP, below 1.2 percent of GDP in 2023. The budget surplus is expected to decline to 0.8 percent in 2025 and 0.6 percent in 2026.In the show Economic bulletin for June “This dynamism of the economy is reflected in most estimates of potential growth,” explained Mario Centeno, of the Bank of Portugal.

The Governor of the Development and Democracy Bank continued, also considering that this is a “challenging time.” The “geopolitical context” is “currently extremely complex.”

“We have conflicts very close to our economic and political sphere and we have an electoral process in the United States that can dictate a lot of the future of the economic context” in the eurozone and Portugal.

Regarding the growth outlook for the Portuguese economy, Centeno considered it “positive,” but one cannot ignore “this difficult context in which this growth is occurring.”

Regarding inflation, the Governor of the Bank of Portugal stated that “there is a process of convergence (…) that is very consistent and coherent with what is observed in the euro area.”

Also regarding the labor market, Mario Centeno declared that “good indicators remain.” “Employment and wages are at their highest levels in the Portuguese economy”He mentioned.

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However, the entity led by Mario Centeno warns that these calculations do not include budget-impacting measures taken in the meantime.

“After the information close, several policy measures with appropriate and lasting budgetary impact that had not been taken into account were announced and approved,” the bulletin stated.