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MIL OSI Translation. Mediterranean Region: Portugal – The Government yesterday submitted to the European Commission Draft Budget Plan 2020, in an invariant policy scenario. This exercise takes place this year in a particular context, as it coincides with a post-election period at the end of the legislature.

The Draft Budget Plan is thus based on a scenario of continuity of current policies, without any new political orientation towards 2020, in line with the respective regulatory framework of the European Parliament and the Council. For this reason, this draft budget plan does not correspond to a proposed State Budget for 2020.

The macroeconomic scenario underlying the Draft Budget Plan 2020 maintains the 1.9% projection for real Gross Domestic Product (GDP) growth in 2019, as set out in the 2019-2023 Stability Program, published in April this year.

This projection represents a deceleration from 2018, incorporating a moderation in private consumption growth, a slowdown in export growth, and an acceleration in investment growth.

The slowdown in export growth reflects a slowdown in our main economic partners, resulting in an impact on external demand directed to Portugal.

For 2020, the macroeconomic scenario underlying the Draft Budget Plan foresees a slight acceleration of GDP growth to 2%. This projection is based on the anticipation of a recovery in economic growth in the euro area, in line with forecasts by international institutions such as the International Monetary Fund.

The recovery in growth in the euro area, Portugal’s main trading partner, should be reflected in an acceleration of external demand and hence export growth.

The Portuguese economy has been relatively resilient to the euro area slowdown and should therefore also be in a good position to benefit from an improvement in the international environment. The acceleration in public investment growth (from 9.7% in 2019 to 16.2% in 2020) should also contribute positively to the growth of the economy.

With regard to public accounts, and once again considering that this is an invariant policy scenario, the Draft Budget Plan submitted to the European Commission incorporates the new national accounts database recently released by the National Statistics Institute (INE) and projects by 2020 an evolution of the public accounts in line with the forecasted economic growth mentioned above, as well as the budgetary impact of all policy measures already adopted in the State Budget for 2019.

The revised 0.1 pp of the budget balance projection for 2019 (from -0.2% to -0.1%) is justified by the improved revenue behavior. By 2020, the Draft Budget Plan foresees revenue developments in line with nominal GDP growth, while public spending evolves in line with political commitments made throughout the now-ending legislature.

The budgetary impact of the final phase of the thawing of public administration careers is highlighted here; public investment projects, however authorized and in some cases already underway; and the growth in social benefits due to the reinforcement of social benefits for inclusion, parenting allowance and family allowance.

The draft State Budget bill for 2020 should be presented in due time by the Government to the Assembly of the Republic within 90 days from the date of its inauguration.

EDITOR’S NOTE: This article is a translation. Apologies should the grammar and / or sentence structure not be perfect.

MIL Translation OSI