Economists highlight government optimism for 2019 and little ambition in state reform – Jornal Econômico

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Economists surveyed by Lusa say they are optimistic about the government's estimate of economic growth and deficit in 2019, saying that the Stability Program (SP) "is not very ambitious" at the level of state reform.

On April 15, the Government presented the Stability Program 2019-2023, the last of the current legislature, in which it revised down economic growth for this year, forecasting an expansion of 1.9%, a decrease of 0.3 percentage points compared to the 2.2% registered in the State Budget, but that exceeds the forecasts of the other organisms.

"The government's forecasts are based on an optimistic estimate of the growth capacity of the Portuguese economy," Angie Suárez Salazar, a BBVA economist for Spain and Portugal, told Lusa.

The economist pointed out that the Government's forecast of a 1.9% increase in Gross Domestic Product (GDP) this year is above BBVA's forecasts of economic growth of 1.5% in 2019 and also exceeds forecasts of the main international organizations – 1.7% from the International Monetary Fund (IMF) and the European Commission – and 1.6% from the Public Finance Council and 1.7% from the Bank of Portugal.

"Although it is possible that the effect of the reforms implemented has increased the rate at which Portuguese GDP can grow without generating imbalances, we think that these levels are closer to 1.5%, in line with our forecasts for the coming years," added Angie Suárez Salazar.

For the evolution of the general government budget balance, the Government maintained the deficit target of 0.2% of GDP for 2019, anticipated a surplus of 0.3% for 2020 and 0.7% of GDP in 2023, last year of the time horizon.

"The 2019 estimate seems too optimistic given the 2019 State Budget and the fact that we are in an election year," said João Borges de Assunção, a professor at the Catholic University.

Filipe Garcia, an economist with the IMF – Financial Markets Information, stressed that "it is good to point to the creation of budgetary surpluses to reduce public debt, which is one of the greatest fragilities and threats of the Portuguese economy" .

"Pointing to a 'surplus' is a breath of fresh air being saluted," he said, adding that "you can not look at this stability plan as a budget because there are so many unknown variables you can only guess at," such as world economic growth and the evolution of interest rates, among others.

João Borges de Asuncion also noted that "the stability program is not very ambitious in terms of state reform, including reforms in the area of ​​social security and pensions."

"The 2019-2023 Stability Program is consistent with the Government's behavior throughout the legislature. The overall goals of the Stability and Growth Pact are met, but the government does not seem motivated to make reforms in the state, "he said.

According to Filipe Garcia, "it is not so positive to verify that it is intended to maintain a tax burden so intense, which removes competitiveness to the economy and makes it believe that the state will remain oversized."

"But I'd rather look at the half-full glass and note that one does not simply want to take advantage of the current cycle to spend a lot more," he said.

For the public debt, the Government anticipated in the 2019-2023 Stability Program that it reach 118.6% of GDP in 2019 and that it will fall to 99.6% in 2023.

João Borges de Assunção stressed that "this value [99,6%] is still threatened by the risks of extraordinary operations in support of the financial sector, "but considered that" if a debt of 100% of GDP is reached in 2023, it would be on the unequivocal path to return to a certain financial normality of State".

"The objective is positive, but this is not yet taken for granted. And depends, above all, on the quality of government and governance, "warned the economist.

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