The closing of the counting votes from abroad having taken place and the appointment of a Prime Minister-designate, Luís Montenegro, are reviving interest in Portugal's economic prospects, according to the Democratic Alliance (AD). With ambitious targets, the macroeconomic program unveiled at the end of January promises an economic growth rate of up to 3.4% by 2028, with a fiscal shock of five billion euros on the table over the next legislature.
The Democratic Alliance's economic plan to stimulate the Portuguese economy
The projections, based on the Conseil des Finances Publiques (CFP) macroeconomic scenario, adopt a cautious approach, with a growth forecast of 1.6% for 2024.
The main contribution to GDP growth, according to the DA's macroeconomic scenario, will come from domestic demand, with an estimated contribution of between 2.5 and 3.1 percentage points.
How will the tax shock affect the economy, particularly as regards income tax (IRS) and corporation tax (IRC)?
According to the coalition's economists, economic growth will be primarily influenced by a five billion euro tax shock over the next legislature, with three billion euros for the IRS, 1.5 billion euros for the IRC and 500 million for housing-related tax measures.
The DA's macroeconomic scenario forecasts private consumption to grow slightly less than GDP, from 2% in 2025 to 3.2% in 2028, while investment should be higher, especially between 2025 and 2026.
The coalition forecasts an increase in investment of 5.2% in 2025 and 4.5% in 2026, with a drop to 3.2% in 2027 and 3.4% in 2028.
Exports of goods and services should also boost the economy, with respective growth rates of 3.8%, 4%, 4.4% and 4.4% for the years 2025 to 2028. Imports, meanwhile, should rise from 3.8% in 2025 to 3.9% in 2028.
As for public consumption, moderate growth is forecast, with a rate of change of between 1.7% in 2025 and 2.5% in 2028.
And the job market?
The DA forecasts an increase in employment from 0.3% in 2024 to 1.1% in 2025, with growth to 1.4% in 2028, while the unemployment rate is set to fall from 6.2% in 2025 to 5% in 2028.
AD's economic program is based on four major structural reforms: reducing taxes on labor and investment, promoting private initiative and productivity, improving the state and fighting corruption, and envisioning a forward-looking economy.
To make these reforms a reality, the coalition proposes ten strategic visions, including broadening the conditions for effective economic freedom, increasing productivity through continuous improvement of human capital, creating conditions conducive to attracting private investment, and fiscal responsibility and sustainability.
Joaquim Miranda Sarmento, leader of the PSD parliamentary group, told a press conference that the AD's economic scenario was conservative. The financial details of the measures announced will be revealed at the presentation of the Electoral Program, where the budget scenario will also be presented.
Sarmento also mentioned that the coalition expects a small surplus of around 0.8% of GDP, with a reduction in public debt to 90% of GDP.
