Portugal’s government projects 2% of GDP growth between 2024 and 2025. Over the entire country, public debt and inflation are mounting. They are very confident about the economic growth of the country. They also project increases in revenue and budget surpluses.
Economic Growth and Budget Surpluses
The government revealed its expectations on national economic performance at a conference on the 2025 State Budget OE2025. Portuguese Prime Minister forecasts a 2% GDP rise between 2024 and 2025.
The administration is certain they will meet their target within the given period, even if this is much higher than the earlier projection. They estimate surplus budgets of 0.3% of GDP in 2024 and a significantly smaller increase of 0.2% of GDP in 2025.
Portugal is experiencing many global economic difficulties. This shows that the government is very confident in its economic plans.
Rising Inflation and Revenue Growth
The Prime Minister also expects that the inflation rate would reach slightly over 2% during the following two years. The administration expects the inflation rate will not go too high but it will negatively impact the buying power of the Portuguese people.
In both 2024 and 2025, the revenue will expand at a reasonably slow pace which would be between 4% and 4.5% per year.
This revenue growth is very important for the government to support public services, reduce debt, and implement reforms.
Public Expenditure Growth
The government forecasts an increase in revenue but public expenditure can increase in the coming year excluding debt payments. They forecast an 8% increase in public expenditure for 2024 which will surpass revenue growth.
This will automatically put pressure on public finances. By 2025, it is also estimated that Public expenditure will reduce to between 4% and 5% according to the Prime Minister.
Public salaries, welfare programs, and other projects are the reasons for the increase. This is an important challenge for the government because they have to manage this increase in public expenditure to maintain economic growth.
Public Debt and Interest Costs
Portugal’s government plans to spend 500 million euros on interest payments in 2024 and to spend 300 million euros on interest payments in 2025. Public debt is also going to be hectic for Portugal.
This will affect their capacity to invest in new projects in 2024 and 2025. The government needs to keep public debt in control because interest rates are increasing around the world. Otherwise, Portugal might face challenges in the coming 4 to 5 years.
Opposition’s Influence On The 2025 Budget
In 2025, the government will also have to respond to new laws that were passed with the help of opposition parties. These laws include tax cuts and toll reductions. These steps will make the government less prosperous, which could put a strain on the estimated budget forecast.
The opposition’s effect on fiscal policies may lead to further difficulties in handling the state budget and ensuring that Portugal continues on a road of growth and stability.
Economic Uncertainty Across Europe
While the government is confident about Portugal’s future, it’s facing challenges from outside. Europe is facing a financial crisis. Big economies like Germany and France are suffering slowdowns. The UK is also facing different financial challenges which is key trade partner for Portugal
Economic professionals, like José Gomes Ferreira from SIC Notícias, have warned that if things get worse in Europe, Portugal could have a tough time meeting its growth and budget goals.
The Portuguese government’s plans for steady economic growth and budget increase in the coming years show that they are very confident about their fiscal policies and they can easily handle difficulties. But they can face major challenges because of the increasing price of public debt, increasing inflation, and uncertain economic conditions across Europe.
The government plans to present the 2025 State Budget to parliament by October 10. These positive economic goals depend on the government’s ability to control public expenditure, maintain fiscal surpluses, and cope with the global economic environment.
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