OE2027? “Margin for new policies is reduced”, says economist

“ A room for manoeuvre to adopt new policies is reduced and depends heavily on revenue behavior and economic developments“, said Ricardo Ferraz, a professor at ISEG and Lusófona University, adding that “if parliament eventually approves measures of great budgetary impact in the specialty, there is of course a risk of entering into a budget deficit in 2027.”.

For the economist, admitting the hypothesis of a zero balance in 2026 and “not exactly expected to have a robust economic growth in 2027”, due to the external conjuncture and taking into account the government’s estimate, in the framework of invariant policies delivered to the Assembly of the Republic, of EUR 4,783 million of the impact of a set of measures already in the balance of 2027, there is the possibility of a budget deficit next year.

“If no action is taken to compensate for this worsening” or, eventually, “abdicate from measures already taken”, he pointed out.

In drawing up the budget, the government will also have to take into account the “adverse external arrangement” that is being experienced, the economist pointed out, considering that “at a time when debt interest from countries is rising, it is essential that the government continues to consider maintaining balanced public accounts as a priority”.

“ It is important that the next Budget, especially in view of the reality and what we have learned from the past, continues to predict a small surplus or a zero balance,” said Ricardo Ferraz, warning that in the discussion in the specialty the parties should have “responsibility in conducting the budgetary process”, namely “at a particularly difficult time when countries’ debt interest is increasing”.

The economist thus defended that it is “fundamental to continue this path of sustainability of public finances”.

The government notes that the economic measures already taken and which will continue to be reflected in the public accounts in 2027 will have an impact of EUR 4,783 million next year, still without new policies from the next budget.

The projection is contained in the “Invariant Policy Framework 2027” delivered to the Assembly of the Republic by the executive of Luís Montenegro (PSD/CDS-PP).

The mandatory delivery document at this stage of preparation of the 2027 state budget proposal includes a forecast of the impact of the main government expenditure and revenue related to known economic or sectoral policy measures and the effects of which extend to the next year, showing their impact without counting the measures of the budget proposal, which may change the final outcome of the final balance.

According to this document, State expenditure on the payment of public debt interest by 2027 is expected to increase by EUR 776 million over this year.

The State Budget must be delivered to the Assembly of the Republic by 10 October, which this year is a Saturday.