Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Portugal eyes small budget surplus in 2024 despite slowing growth

Published 10/10/2023, 11:14 AM
Updated 10/10/2023, 11:17 AM
© Reuters. FILE PHOTO: A view of Portuguese parliament during a debate on 2020 state budget at the parliament in Lisbon, Portugal February 6, 2020. REUTERS/Rafael Marchante/File Photo

By Sergio Goncalves

LISBON (Reuters) - Portugal unveiled its draft 2024 budget on Tuesday, projecting a surplus of 0.2% of GDP despite a further economic slowdown to 1.5% from this year's expected 2.2% amid high interest rates and slowing exports to key trading partners in Europe.

This year, the government now expects a surplus of 0.8%, Portugal's second in almost five decades after a 0.1% surplus in 2019, and a huge improvement on its earlier forecast of a 0.4% deficit. Last year, the country had a deficit of 0.4% of GDP.

The document that Finance Minister Fernando Medina submitted to parliament, where the ruling Socialists have a working majority, put the public debt ratio next year at 98.9% of GDP, down from this year's 103%, which would be the first time it drops below the 100% mark since 2009.

In the document, the fiscally frugal government said it will proceed with the "progressive and considered assessment of emergency support measures" for the population struggling with high inflation and interest rates, and reiterated "the commitment to responsible public accounts".

The European Union absorbs around 65% of Portuguese exports of goods and services and this year, Portugal is already feeling the negative impacts of a slowdown or recession in some of its main EU trading partners, despite tourism being at record highs.

The government expects exports - which account for more than 50% of GDP - to grow just 2.5% in 2024 after 4.3% this year.

With the help of EU funds, investment is projected to rise by 4.1% next year after an increase of 1.3% in 2023.

The government will reduce intermediate income tax rates for the middle class, with a budget cost of 1.3 billion euros ($1.38 billion), and exempt young people entering the job market from income tax.

Opposition parties have criticised the government for failing to redistribute large additional revenues from inflation, especially with the value added tax, to families hit hard by rising costs of living.

But the government argues that, especially amid an adverse external environment, it must stick to budgetary prudence and keep reducing the still high public debt, on which the country nearly defaulted in 2011 and had to be rescued in a multi-billion-euro international bailout.

© Reuters. FILE PHOTO: A view of Portuguese parliament during a debate on 2020 state budget at the parliament in Lisbon, Portugal February 6, 2020. REUTERS/Rafael Marchante/File Photo

"Portugal can address the challenges it faces in the short and medium term" with this budget, Medina said. Inflation in Portugal is expected to slow to 3.3% next year from this year's 5.3%.

($1 = 0.9439 euros)

Latest comments

Go Portugal
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.