Optimal Fiscal Path Considerations: Portugal

Author: Mr. Ippei Shibata and Mr. Volodymyr Tulin

Despite achieving a rapid reduction in the public debt-to-GDP ratio in recent years, Portugal's debt ratio remains relatively high at 113.9 percent of GDP in end-2022.

Volume/Issue: Volume 2023 Issue 045

Publication date: July 2023

ISBN: 9798400247231

$15.00

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Topics covered in this book

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Banks and Banking , Economics- Macroeconomics , Money and Monetary Policy , Public Finance , International - Economics , Fiscal stance , cycle stabilization , government deficit , government debt , Washington , D , C , International Monetary Fund , Portugal's debt ratio , model point , interest rate sensitivity , I , model detail , Real interest rates , Fiscal consolidation , Government debt management

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Summary

Despite achieving a rapid reduction in the public debt-to-GDP ratio in recent years, Portugal's debt ratio remains relatively high at 113.9 percent of GDP in end-2022. This paper employs an analytical model to determine the appropriate trajectory for structural consolidation to sustain ambitious debt reduction over the medium term, taking into account the uncertainties in the economic landscape. The model points to a need for continued fiscal tightening between 2024 and 2028. Optimal consolidation would be higher under higher longterm interest rates, lower medium-term growth prospects, or increased market sensitivity to debt.