In the report of the IMF mission to Portugal under Article IV, the institution states that, after the 6.7% growth of the Portuguese economy in 2022, “significantly higher” than the 3.5% of the euro zone, “real GDP [Gross Domestic Product] growth is expected to slow down in the rest of the year to an average of 2.6% in 2023 and inflation to retreat to 5.6%”.

On the 11th of April, in the update of world economic forecasts, the IMF had pointed to a GDP growth of 1% for the Portuguese economy this year, predicting that the inflation rate would be 5.7%. The Government predicts a growth of 1.8% in 2023.

“High inflation and more restrictive financial conditions are weakening the economy”, maintains the IMF, considering that “the higher cost of living should penalise the growth of domestic demand and the lower global and euro zone growth should weaken the increase of exports”, leading to “growth stabilizing around 2% in the medium term”.

As energy prices fall, the institution anticipates that inflation will continue to decline, but it points out that underlying inflation – which excludes food and energy – “should be more persistent, due to the rigidity of the labour market and high-profit margins".


In this context, the IMF recommends that, this year, fiscal policy should remain “non-expansionary, in order to preserve room for fiscal manoeuver and support the monetary policy”, but should, at the same time, be “flexible, in case shocks happen”.

The IMF mission recommends that the Government invest in “measures to increase revenue performance in a sustained manner and improve the composition and efficiency of expenditure”.

“Tax reforms must move towards eliminating distortions, reversing reduced VAT rates and rationalising tax expenditures. Modernising the tax system, including digitising the tax administration, would improve tax efficiency. Higher wealth taxes would increase revenue and help alleviate house price pressures. The reduction in energy prices leaves open the possibility of an increase in carbon taxes”.

The IMF also advocates an “increase in the share of public investment – namely in the implementation of the Recovery and Resilience Plan – in current expenditure, reversing recent trends”.