Public spending watchdog predicts 1.6% growth for Portugal in 2024

Portugal’s Council for Public Finances – an independent public spending watchdog – has predicted that Portugal’s economy will grow 1.6% this year.

The CFP’s forecast is below the 2% calculated by the Bank of Portugal, but above the 1.5% set out in Portugal’s State Budget for 2024.
The CFP forecast is the same as it had been in September 2023, but with a slight upward revision in terms of Portugal’s real GDP economic development to 2027 when growth should stabilise at 2%.
Estimates point to growth of 1.9% in 2025 and 2.1% in 2026. Although net exports are still making a positive contribution to GDP growth, over the coming years it will be negative. Internal demand will likely be the main driver for Portugal’s economic growth.
In its report, the CFP warns of various sources of uncertainty such as geopolitical instability and the evolution of monetary policy from the European Central Bank.
Nevertheless, the watchdog emphasis that this period to 2027 will also be marked by an expectation of an acceleration in the application of EU funds in Portugal’s Recovery and Resilience Programme which should reach a peak in 2026, as well as a hoped for continued fall in interest rates and attendant inflation, particularly from 2026. This will benefit the real disposable income of Portuguese families and therefore levels of consumption.
As for inflation, his should fall down to 2.6% in 2024, 2,2% in 2025 and stabilise at around 2% from 2026.
The organisation led by Nazaré da Costa Cabral estimates that Portugal’s public debt will fall to 80% of GDP by 2028 providing that the government keeps a tight rein on public spending.
Budget surpluses should continue until 2028 at 0.5% of GDP this year, 0.6% in 2025, 0.1% in 2026 and 0.8% in 2028 onwards, but warns that RRP loans from the EU that will have to be paid back will partly explain the lower surpluses calculated as a percentage of GDP.