The Portuguese government said on Monday it will follow “the general guidance” given to European Union (EU) countries regarding the energy crisis, but conceded to end public support in 2024 if it is not justified, as planned by the European Commission.
“We will follow the general orientation that has been established for the various countries and that corresponds to the fact […] that prices are already lower than the prices we had before the conflict,” of the Ukraine war, Portugal’s finance minister Fernando Medina said in Brussels.
“The prices are in fact already lower than those that existed before the conflict, that is, that motivated the existence of public support and it is important that we act in this way, that is, to reduce support when it is no longer necessary,” he added.
In the European Commission’s spring economic forecasts, published today, the institution indicates that the net budgetary cost of energy support measures is equivalent to 0.8% of Gross Domestic Product (GDP) in 2023, compared with 2.0% in 2022, but does not make an estimate for 2024, assuming the end of such aid.
For Fernando Medina, the Portuguese executive should move forward with “support when it is needed and where it is needed”.
“For example, today they are less necessary in the area of energy, but they are, for example, necessary in the area of food”, hence the “reduction of VAT in the fundamental basket of foodstuffs”, the minister pointed out.
According to the minister, “this is how economic policy should be managed.
The European Commission forecasts that the Portuguese deficit will fall to 0.1% this year, the lowest in the euro zone, the best result apart from the surpluses forecast for Ireland and Cyprus, and is more optimistic than the government, it was announced today.
In the spring economic forecasts, Brussels points to a reduction of the Portuguese deficit from 0.4% of Gross Domestic Product (GDP) in 2022 to 0.1% this year and 2024.
The projection places Portugal as the country with the lowest deficit in the eurozone and the European Union (EU) this year, a budgetary result only surpassed by the surpluses projected for Ireland (1.7%) and Cyprus (1.8%) – and by the 2.3% forecast for Denmark.
The near balance forecast by Brussels compares with the deficit of 0.4% this year and 0.2% in 2024 expected by the Portuguese government in the Stability Programme, delivered in April.
The EU executive expects dynamic growth in public revenue to continue in 2023 and to decrease slightly in 2024.
It also predicts a drop in the public debt to GDP ratio from 113.9% in 2022 to 106.2% in 2023 and 103.1% in 2024.
Also today, the European Commission said it had not yet received Portugal’s revised Recovery and Resilience Plan (RRP) for reprogramming of funds and projects, but said it was in cooperation with the Portuguese authorities and did not foresee “specific problems”.
When questioned about this situation, Fernando Medina stressed that “Portugal is one of the countries that is most advanced in the implementation of its RRP”.
“The reprogramming of the RRP will follow exactly its path, its schedule, its form,” he said, without specifying.
