According to the release, the rating agency said that this year’s economic recovery “should facilitate a reduction in the general government deficit” to 4.7 percent, as well as a return of the public debt to gross domestic product (GDP) ratio “to a downward path”.

According to the agency’s forecasts, the public debt-to-GDP ratio is expected to fall from 133.4 percent in 2020 to 128.4 percent in 2021.

“We project that the government will be able to achieve a primary budget surplus in 2023, as a sustained recovery takes place,” the note reads.

S&P also anticipates that the travel and tourism sector is not expected to recover to the 2019 level until 2023.

“The key determinant of economic performance for 2021 will be whether the public authorities can achieve the goal of vaccinating 70 percent of the adult population by 31 August, enabling a recovery in private consumption, which accounts for two-thirds of GDP,” the note can be read.

As for the contribution of European funds, this should be felt from 2022, with an average annual GDP growth of 4 percent until 2024.

Another of the consequences of European funds is that “by the end of 2026 Portugal’s investment should exceed 20 percent of GDP, a level reached only more than a decade ago.”

“A further benefit of the expected increase in public investment in the energy sector would be to cut the high level of net hydrocarbon imports, at 2.7 percent of GDP, by about half over the next decade,” the document can read.
S&P did not comment on Portugal’s rating, keeping it at BBB (investment) level with a stable outlook.

In its comment, the US agency said the outlook reflects that fiscal and monetary support at European level “will offset a one or two year shock to Portugal’s economy and public finances,” due to the Covid-19 pandemic.

Forecasts for national economic growth in 2021 range from 1.7 percent from the Organisation for Economic Cooperation and Development (OECD) to 6.5 percent from the International Monetary Fund (IMF), after a 2020 marked by the Covid-19 pandemic.

In the State Budget (OE) the Government pointed to economic growth of 5.4 percent in 2021, but has already revealed that it will revise this scenario downwards in April, when it presents the Stability Programme.

The Public Finance Council (CFP) predicts growth of 4.8 percent, the European Commission of 4.1 percent and the Bank of Portugal of 3.9 percent.

As for the deficit, the Government’s estimates pointed to 4.3 percent of GDP, the CFP’s to 3.2 percent and the IMF’s to 2.7 percent, the most pessimistic being that of the OECD (6.3 percent).