PS government's Stability Programme, presented by Finance Minister Fernando Medina, under fire: Image: Lusa

Government “more optimistic”: growth up, inflation down

But opposition parties not convinced

Finance minister Fernando Medina presented the government’s programme of Stability 2023-2027 in Lisbon today, forecasting increased growth and a slow reduction in inflation.

Growth he sees as reaching 1.8% this year (moderately above the 1.3% envisaged last October); inflation “will continue to decrease”, reaching 5.2% at some point in 2023.

This was spun as a government that is “more optimistic”. But it hasn’t really ticked the necessary boxes: prices will continue to rise, even Medina concedes this. Wages – much more to the point – will continue to lose their purchasing power.

Fernando Medina’s ‘optimism’ was certainly not shared by parties of the opposition, nor was the increased growth forecast given much shrift by political commentators.

State advisor and regular television pundit Luís Marques Mendes said last night that growth is still much too low; salaries are still way below any level that could be dubbed ‘decent’.

But with regard to the country’s deficit, that is being ‘reviewed’ at 0.4% (an improvement on the 0.9% in the State Budget), while public debt is also being seen as likely to fall to 107.5% this year, and below 100% in 2025.

Considering levels of the recent past (the country got to stages where public debt was around 130% of GDP) this, on paper, could be seen as ‘impressive’ – but again, as Luís Marques Mendes has said: “People cannot eat public debt”. It boils down to numbers on a balance sheet – it doesn’t put food on the table.

Nonetheless, Mr Medina lays a great deal of stock on numbers on a balance sheet, thus he has predicted public debt for 2024 (103%); 2025 (99.2%); 2026 (95.6%) and 2027 (92%), “signifying a 22 percentage point reduction between 2022 and 2027”.

These are not calculations shared by, for example, the IMF, the OECD or the Council of Public Finances (all of which see public debt this year performing less well), but these entities were not presenting the Stability Programme this morning.

Only last week, the IMF forecast ‘further inflation for Portugal this year, more unemployment’ – and admittedly ‘more growth’ too’.

Prime minister António Costa was very quick to point out the IMF often gets its calculations wrong.

With the promise of ‘further measures of support’ to be announced after an extraordinary Council of Ministers this afternoon, ‘sweetners’ to the relatively dry news came in the pledge that pensions will see a 3.57% increase in July (again, it’s small potatoes to what had been expected before the government ‘changed the law’) and tax revenue has added much-needed years of life to the struggling Social Security system.

Indeed, SIC television news quotes labour minister Ana Mendes Godinho as forecasting a pot in Social Security of €48 billion by 2060 which is “the best signal we can give to future generations”.

But, echoing Marques Mendes’ observation, that doesn’t help people right now, in 2023, when the pensioners of 2060 can’t find affordable housing.

Opposition parties appear to have cut right through ‘the talk’, to suggest (Bloco de Esquerda) that the government is focusing on a completely different country.

Said outgoing coordinator Catarina Martins: “The stability programme presented by the Government is not only what any party on the right would present but it is truly irresponsible at this time of crisis in which we live, when there is so much lacking in health, schools, justice and transport, and the Government continues to pretend that it lives in a country other than this one”.

Martins sees three facts emerging from today: “The first is that the economy grows, prices continue to rise, but salaries continue to lose purchasing power, and about this there is not a single effective measure”, she says.

Iniciativa Liberal (IL) repeats Marques Mendes’ contention that 1.8% growth “is much too small”, stressing that much of this is down to the ‘magic’ of the RRP (Brussels’ billions for recovery and resilience); PAN has accused the government of being “obsessed with the deficit”, and PCP communists believe the government is simply pandering to the EU “and economic groups”.

PSD social democrats – the only party with a ‘fighting chance’ of toppling the Socialists in elections which many believe will come early, sometime next year – have called today’s exercise another “exercise in propaganda and mystification”, albeit the party welcomes the fact that the executive is finally returning pensioners a little of what they are due.

The programme will be debated in parliament, and then forwarded to Brussels.

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