Selected Issues Papers

Optimal Fiscal Path Considerations: Portugal

Author/Editor:

Ippei Shibata ; Volodymyr Tulin

Publication Date:

July 11, 2023

Electronic Access:

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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.

Series:

Selected Issues Paper No. 2023/045

Subject:

Financial services Fiscal consolidation Fiscal policy Fiscal stance Government debt management International organization Monetary policy Public financial management (PFM) Real interest rates

Frequency:

Regular