Fernando Medina rules out recession risk in Portugal

Finance Minister Fernando Medina said on Monday that the risk of a recession in the Portuguese economy is “distant”, highlighting macroeconomic forecasts published by Brussels, which assume strong economic growth and low inflation.

“Higher growth and lower inflation, the risk of a recession is eliminated,” Medina said, speaking to reporters at the entrance to the Council of Ministers of Finance of the Eurozone (Eurogroup).

The person in charge of finance also put forward important data, namely “the fact that all forecasts at the moment give positive growth for the Portuguese economy.”

“Any additional growth capacity that we have and that we manage to win in 2023 has already been made on the basis of the very high capacity utilization achieved in 2022,” he stressed.

For Fernando Medina, forecasts from Brussels avoid “a more difficult scenario than the one envisaged a few months ago” for gross domestic product (GDP) growth, also highlighting a downward revision to inflation.

The European Commission has raised its growth forecast for the Portuguese economy this year to 1%, hoping that after a weaker start to the year there will be an improvement compared to the second quarter.

Brussels’ forecast represents an upward revision of 0.1 percentage points (pp) and 0.3 percentage points. for 2022 and 2023, respectively, compared to the November report. However, for this year it is below the government’s forecast, which expects growth of 1.3%.

As for the inflation rate this year, the municipality’s executive has revised it downward to 5.4%, believing that the peak was reached in the last quarter of last year, but remaining more pessimistic than the government.

In winter forecasts released this Monday, Brussels points to Portugal’s inflation rate of 8.1% in 2022 and 5.4% in 2023.

The forecast for 2022 is higher than the November report by 0.1 p.p., but revised downward by 0.4 p.p. compared to previously expected this year.

At a press conference, European Economic Commissioner Paolo Gentiloni said on Monday that he hopes Portugal’s economy will once again perform better than the commission had forecast.

Asked about the differences between the estimates from Brussels and Lisbon, Gentiloni said they were due “mostly to different closing dates.”

“For example, if we compare our forecasts with those of Banco de Portugal [BdP], find more optimism from the BJP for growth in 2023 and less optimism in the Bank of Portugal’s inflation outlook. Our forecast is more favorable in terms of inflation than that of the Bank of Portugal, and less favorable in terms of growth,” he said.