LISBON, Nov 16 (Reuters) – Portugal expects financial progress of at the very least 6.7% this yr, beating its 6.5% forecast on the again of home demand and tourism, serving to the nation additional slash one in every of Europe’s heaviest public debt burdens, its finance minister advised Reuters.
Regardless of a glum outlook in Europe amid excessive inflation and rates of interest, he anticipated Portugal to keep away from a contraction within the fourth quarter, which “could possibly be extra optimistic than many analysts assume” because of an additional 2.4 billion euros ($2.5 billion) in support for households since October to sort out inflation.
The financial system must also proceed to learn from tourism because it bounces again from the COVID-19 pandemic, and tourism is now extra widespread all year long than previously, Finance Minister Fernando Medina mentioned.
“Even when (quarter-on-quarter) progress is zero within the fourth quarter, we’ll have a progress charge of 6.7% in 2022, one of many highest in Europe,” Medina mentioned.
Progress accelerated to 0.4% within the third quarter from the earlier quarter’s 0.1% as non-public consumption unexpectedly rose regardless of inflation at three-decade highs.
Whereas stable progress coupled with very low unemployment creates “a stable base for coming into 2023”, the growth is projected to sluggish to simply 1.3% in 2023, with non-public consumption nearly stagnating and exports shedding steam given an anticipated sharp slowdown or recession in main European economies.
“It is a important slowdown…(however) it is progress. So, after a really sturdy yr, we’ll proceed to develop,” he mentioned, including that it was potential to surpass these projections once more.
FOCUS ON CUTTING DEBT
Because the European Central Financial institution hikes rates of interest to battle inflation, slicing public debt is Medina’s “key precedence” as he goals to slash it by a document 10 proportion factors to 115% of GDP this yr and to 110% in 2023.
That ought to transfer Portugal’s debt ratio down from the euro zone’s third-highest place after Greece and Italy, with one of many runners-up Spain, France or Belgium probably overtaking it, Medina mentioned. He expects the financing circumstances for corporations and households to enhance because of this.
Amid sturdy progress and excessive inflation, tax revenues soared by 7.3 billion euros within the first 9 months, greater than double the whole-year goal, however the authorities saved the price range deficit objective at 1.9% of GDP this yr, channelling a lot of the further money to help households and corporations.
The deficit would nonetheless be decrease than 2.9% in 2021 and the purpose is to chop it additional to 0.9% subsequent yr.
Regardless of a worrying quick rise in charges, Medina expects Portugal to keep away from a spike in dangerous loans of households because of measures equivalent to a current decree ordering banks to renegotiate mortgages of as much as 300,000 euros for susceptible households.
($1 = 0.9626 euros)
Reporting by Sergio Goncalves and Aislinn Laing, modifying by Andrei Khalip and Emelia Sithole-Matarise
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