IMF foresees smaller budget deficits, longer wait for budget surplus

By TPN/Lusa, in Business · 11-10-2018 11:15:00 · 0 Comments
IMF foresees smaller budget deficits, longer wait for budget surplus

The International Monetary Fund (IMF) has issued a more optimistic forecast for Portugal’s public sector budget deficit this year and next, but predicts that the first surplus will only be achieved in 2022, contrary to the government’s projections.

According to the Fiscal Monitor report containing world budget forecasts, released on Tuesday, the IMF now sees a deficit this year of 0.7 percent of gross domestic product, in line with the government’s official forecasts and lower than the IMF’s April forecast, of 1.0 percent.
For 2019, the IMF now projects a budget deficit of 0.3 percent of GDP - down from 0.9 percent in its April forecast, but above the 0.2 percent projected by the government in its Stability Programme 2018-2022.
In that programme, the government commits to a deficit close to zero (0.2 percent) next year already – the last year of the current parliament and a year of European Parliament elections. After that, it sees budget surpluses swelling every year: to 0.7 percent of GDP in 2020, 1.4 percent in 2021 and 1.3 percent in 2022.
The IMF, however, which bases its calculations on the assumption of an unchanged policy scenario for the next few years, believes that the first surplus, of 0.2 percent of GDP, will only occur in 2022, with the deficit only wiped out a year earlier.
The projections for Portugal are coordinated by Vitor Gaspar, a former minister of finance in the country, now an IMF director, and are based on the 2018 state budget, adjusted to reflect the IMF’s macroeconomic forecasts.

The report also projects total public indebtedness in Portugal to fall by more than 20 percentage points from its current level.
It sees the debt shrinking from 125.7 percent of GDP at the end of last year to 102.8 percent in 2023.
At the end of this year, the debt should be 122.2 percent of GDP, a year later at 118.4 percent, at the end of 2020 around 114.9 percent, in 2012 just 107.3 percent, and in 2022 as little as 102.0 percent.
The government, in its stability programme, projects a reduction in the debt of 23.6 percent percentage points of GDP, but in just five years, to 2022.
The IMF on Tuesday also revised down its projections for Portugal’s economic growth this year to 2.3 percent, and left its forecast for 2019 unchanged at 1.8 percent, less than the government is projecting.
According to the latest World Economic Outlook, the IMF shaved one tenth of a percentage point off its forecast for growth in Portugal’s gross domestic product, from the 2.4 percent it had been predicting since April.
That is in line with the government’s own forecast, contained in its Stability Programme 2018-2022, unveiled in April.
The IMF remains more optimistic than the government on the jobs market, predicting unemployment of 7 percent this year and 6.7 percent next.
The government, in turn, projects the jobless rate to be 7.6 percent this year, falling to 7.2 percent next, and only below 7 percent in 2020 (6.8 percent) before falling further to 6.5 percent in 2021 and to 6.3 percent in 2022.


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