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The OECD revises its estimate for economic growth in Portugal to 1.6%.

The OECD revises its estimate for economic growth in Portugal to 1.6%.

“Cautious optimism is beginning to take hold in the global economy, despite modest growth and the remaining shadow of geopolitical risks. Inflation is falling faster than expected, and labor markets remain strong, with unemployment at or near historic lows.It begins with a mention a report Economic forecasts.

but, “The effects of more restrictive monetary conditions are becoming felt, especially in housing and credit markets.”

The economic recovery is “unfolding differently across regions”, with a mixed macroeconomic scenario expected to continue, with inflation and interest rates falling at different rates and with different needs for budget consolidation.In the report released on Thursday, the OECD warned of the risks that conflicts in the Middle East and Ukraine would damage energy and financial markets, slow growth and increase inflation again.

According to the Organization for Economic Cooperation and Development, global GDP this year is expected to rise by 3.1 percent – a scenario between optimism and caution, with regard to the economies of different countries. As for the Portuguese economy, The organization is undertaking an upward revision: GDP is expected to rise by 1.6 percent, higher than the 1.2 in the organization's latest forecast.

“Real GDP growth is expected to decline to 1.6% in 2024, then recover to 2.0% in 2025.”
has been revealed. “A constrained labor market and low inflation support real wage growth and private consumption, and the implementation of the recovery and resilience plan will boost investment.”
Flexible growth
Portugal's budget policy should be relaxed in 2024, as the budget balance is expected to decline from 1.2 percent of GDP in 2023 to 0.3 percent in 2024. Projections also indicate that by 2025, Portuguese GDP will rise to 2 percent. With a looser fiscal policy, stable energy prices, and lower inflation, purchasing power could increase and contribute to reducing public debt.

“With energy prices stabilizing and job demand slowing, inflation will continue to moderate to 2.4% in 2024 and 2.0% in 2025.”

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For the Portuguese economy The OECD states that “the implementation of a poverty reduction system, a reduction in personal income tax and an increase in social benefits will support activity and compensate for the phasing out of support measures to mitigate the inflationary shock in 2024.”.

According to the report, the effects of high inflation, more restrictive fiscal measures and “weak growth in Portugal’s main trading partners have led to a slowdown in economic activity in 2023.” However, GDP has rebounded in recent quarters, and employment in the country remains “at a historically high level,” supported by “growth in the tourism sector and an increase in permanent residency expenditures.”

“Consumer price inflation fell to 2.6% in the year to March, and real wage growth and household confidence rebounded steadily.”

Although energy and food prices remain high, energy prices have fallen and “food price inflation has slowed to 0.3 percent.”

“However, previous rises in interest rates have led to a significant increase in mortgage payments and business costs, and the contraction in lending to households and businesses is weighing on consumption and investment,” the OECD says.

The organization also leaves a warning for Portugal: despite recording a continuous decline, “public debt in relation to GDP remains high.”
“Therefore, strong growth, more efficient spending and a strengthened fiscal framework are needed to address increasing fiscal pressures caused by an aging population and long-term investment needs.