Lisbon, May 2, 2025 (Lusa) - The Portuguese Public Finance Council (CFP) considers the government's forecast of 2.4% growth in the Portuguese economy this year to be "probable but not prudent", given the risks, existing projections, and macroeconomic uncertainty.
"Considering the risks of the Ministry of Finance scenario, the uncertainty of the current macroeconomic outlook and the existing projections for the Portuguese economy, the forecast of 2.4% growth seems likely but not prudent," says the CFP in its Opinion on the Annual Progress Report 2025 (APR/2025), released on Friday.
It points out that the growth scenario presented by the government in the APR/2025 is higher than the most recent projections for the Portuguese economy presented by other institutions and is based on an expected growth in public consumption significantly higher than the average projection of the reference institutions.
"The MF forecast for real growth in the Portuguese economy, at 2.4%, is higher than the average estimate of the other institutions, at 2.1%. More specifically [...], it is at the upper limit of the 30% confidence interval and is higher than the 2.3% projection put forward by the BoP, which is the highest among the various institutions," it said.
In addition, notes the CFP, "the timeliness of the external assumptions" contained in the RAP/2025 "may have been compromised" by its date of 26 March and its failure to incorporate the new protectionist measures announced by the US on 2 April and the resulting uncertainty into the assumption for external demand growth.
The body led by Nazaré da Costa Cabral also notes that the MF's forecast for inflation — 2.4%, measured by the Harmonised Index of Consumer Prices (HICP) — is also "the highest of those available" and faces' a downward risk" associated with the recent price of oil on international markets and the appreciation of the euro.
Concerning the data on net expenditure in 2024, the CFP's opinion points out that the estimated growth of this indicator "is sensitive to the quantification of discretionary revenue measures (DRA)", which, "by having reduced revenue in a discretionary manner, penalised the evolution of the net expenditure indicator".
"Primary expenditure financed with national funds net of co-financing from EU [European Union] funded programmes, cyclical elements of expenditure relating to unemployment benefits, one-off measures and other temporary measures, grew by 10.1% in nominal terms in 2024, i.e. more than the 9% considered in the POENMP [National Medium-Term Budgetary-Structural Plan] before MDR," he adds.
Emphasising that considering MDR' raises the net expenditure growth to between 11.6% and 12.5%", the CFP recalls that "the approved trajectory considered a growth in net expenditure of 11.8%".
In this regard, the Council notes that the difficulties in estimating net expenditure "reinforce the need for a protocol" between the CFP and the Ministry of Finance. It regrets that, despite the requests made, the latter has not explained the methodology followed nor provided the data needed to support its estimate, particularly in relation to the PIT and PSI MDRs.
In the specific case of PIT, it maintains that the Ministry of Finance's estimate of the impact of applying the PIT 2024 package "has not been sufficiently explained" and that the impact estimated by the CFP is €2.17 billion in 2024, which contrasts with the €1.85 billion reported by the government.
It realises that this difference mainly reflects the estimated budgetary cost of the personal income tax reduction measure approved in the State Budget for 2024 €1.358 billion, and the additional reduction in personal income tax by parliament €708 million.
"We reiterate the need to adopt a new national rule that supplements the European framework" that “is not likely to be influenced by unobservable variables such as net expenditure”, emphasises the CFP.
The new EU economic governance legal framework of April 2024 provides for the publication of an Annual Progress Report (APR), which is a report by a member state on the implementation of the national medium-term budgetary-structural plan, including the net expenditure path as determined by the Council of the EU and reforms and investments.
The RAP must be submitted by 30 April each year.
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