Portugal: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Portugal

This 2022 Article IV Consultation presents that after a deeper pandemic-induced recession than the rest of the euro area in 2020, the Portuguese economy gained ground in 2021, and growth strengthened further in 2022:Q1. Policies need to balance short-term urgencies with a smooth transition to private-led growth, rebuilding fiscal space and advancing reforms for stronger growth and a more resilient economy. The 2022 budget remains suitably accommodative, excluding the appropriate unwinding of coronavirus disease 2019 measures. Broad-based measures in response to the energy price shock must be kept temporary and preferably replaced with more targeted measures to mitigate the impact on vulnerable households. Fiscal policy needs to be flexible for further support under severe adverse scenarios or more savings under fiscal over performance. A timely implementation of the National Recovery and Resilience Plan through efficient and transparent planning and budgeting, organization and oversight of the investments and reforms, coupled with reforms to reduce labor market duality and strengthen insolvency regimes would limit scarring, raise living standards, and build a more dynamic economy.