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The IMF no longer believes in the government's target for GDP this year – public finance



The economic slowdown in the third quarter, as confirmed by the National Statistical Institute (INE), makes GDP growth worse than expected by the government. The International Monetary Fund (IMF), in its statement on Friday, November 30 after the post-Lisbon mission missions, reflected its forecasts: GDP revised by 2.3%, government target at 2, 2%.
"GDP growth of 2.1 percent year-on-year in the third quarter indicates a slowdown," Washington officials say, stating that braking reflects "mostly" slower growth in exports and investments.
The IMF expects the economy to grow by 2.2% in 2018, slowing down to 1.8% in 2019 (2.2% in the Government scenario) and 1.4% in the mid-term. "Investments and exports should continue to be important growth factors, albeit at slower pace," the IMF notes.
This expectation of slowdown is focused on the risks identified by the Fund for Portugal. Risks are mainly in an external environment. "Portugal can directly feel the negative consequences of lower growth in the eurozone, trade with Brexit and weaker international trade in line with the rise in protectionism," the IMF said.
But there is also an internal risk: "On the domestic side, there is a risk that the government will adopt weak policies that affect investor and business confidence, and may eventually result in increased budget rigidity and reduced quality of public service spending," said press release on staff costs advancement and increase of civil service.
On the other hand, if policies are maintained, Portugal will increase its resilience to market volatility and other shocks. The IMF recognizes that there are positive "cyclical" events that are currently unforeseen.
The IMF still does not believe in the 2019 deficit
The International Monetary Fund maintains that Mario Centeno will not be able to reduce the deficit to 0.2% of GDP next year as anticipated by the state budget for 2019. This is basically due to differences in economic growth affecting tax revenues.
The IMF expects the deficit to remain at 0.4 percent (0.3 percent in the previous report), assuming the economy will grow by 1.8 percent, while the government predicts a 2.2 percent growth.
Even in the structural deficit, technicians predict that this will lose 0.1 percentage points compared to 2018, while the Executive Plan expects an improvement of 0.2 percentage points.
It is expected that public debt as a percentage of GDP in 2018 will be reduced to 121%, 2019 to 118%, and 2023 to 103%.
Like public debt, private indebtedness must also continue to fall, "helping to reduce vulnerability." "Like public debt, the taxation of benefits retained economic growth," the IMF said, arguing that the economy's strengths depend on investments, which should depend on domestic savings so as not to create external imbalances.
"Increasing productivity and investment means focusing on improving the regulatory environment, supporting the company's ability to grow, strengthen its capital and innovation and contribute to improving the capability of the population," the Fund says. Another factor highlighted in the statement is the need to keep the labor market "flexibly" so that Portugal has the ability to deal with harmful shocks.
(News last changed 15h46)


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