Central bank forecasts deficit of 0.1% for 2023

The Bank of Portugal is more optimistic than the government over the budget deficit for 2023, predicting an overspend of 0.1% and a surplus of 0.2% next year.

According to its monthly bulletin for June published on Friday, the central bank led by Mário Centeno released its forecast for the budget balance and believes that the nation’s annual accounts will be almost balanced for the next two years providing there are no external shocks.
After an 0.4% GDP deficit in 2022, the BoP predicts a reduction to 0.1% this year and a surplus of 0.2% next year.
The forecast from the Bank of Portugal headed by the ex-minister of Finances and former chairman of Eurogroup is more optimistic that that of the government which forecasts that Portugal’s annual deficit will be the same as last year, with a slight improvement on 0.2% and 0.1% in 2024 and 2025.
The BdP also predicts that the primary balance should be at around 2.5% but below the 3.1% posted in 2019.
According to forecasts from the European Commission, only Portugal, Cyprus, and Ireland should post balanced budgets by 2024.
However, the supervisor points out that despite an improvement in Portugal’s primary balance for the projected period, it will be below the pre-pandemic percentage.
“Despite the budget balance for 2025 being close to that of 2019, the composition is different. In 2025 the balance will benefit from a more positive cyclical component with a lesser ratio of expenditure on interest and the absence of temporary measures that reduced the balance in 2019”, bringing the balance down by 1.1% of potential GDP compared to 2019.

Image: Lusa – António Pedro