IMF cuts GDP forecast to 4%

The International Monetary Fund published its economic forecasts for the world economy on Tuesday in which it as lowered Portugal’s GDP growth outlook to 4% this year and 2.1% in 2023 because of the economic effects from the war in Ukraine.

The figures are a downward revision from the Washington-based organisation’s last forecast in October when it had projected Portugal’s GDP growth to be 5.1% for this year.
The new 4% estimate for 2022 is more pessimistic than the Portuguese government’s own predictions. In its Stability Programme delivered to Brussels, João Leão, the then minister of Finances, forecast growth of 5% for this year, a percentage which has now been downgraded to 4.9% by Fernando Medina in the proposed State Budget 2022 which was delivered to parliament last week.
The Bank of Portugal (4.9%) and the Council of Public Finances (4.8%) have more optimistic forecasts for the Portuguese economy than the new IMF percentage for growth.
In justifying this greater pessimism, the IMF blames the war in Ukraine which led its director Kristalina Georgieva to lower world growth rates. “Beyond the immediate humanitarian impact, the war will put the brakes on economic recovery and fuel inflation even more”, it states in its World Economic Outlook.
In the Euro Zone, and after a recovery of over 5% last year, the IMF is expecting an economic slowdown to 2.8% this year and 2.3% next year overall.
This means that the Portuguese economy will converge this year with the Euro Zone, but the convergence will be short-lived as the IMF predicts growth of just 2.1%, below the 2.3% forecast for the Euro Zone.
For next year, the Government had been hoping for a sharper growth of 3.3%.
However, Portugal does do better in terms of forecasts on inflation than its European partners. The IMF forecasts inflation of 4% in Portugal, in line with government estimates, whereas the average Euro Zone inflation is expected to be 5.5%.