The inflation rate is expected to fall to 2.5% this year, below the 3.3% projected in October, maintaining the downward trend until it reaches the 2% level in 2026, according to the Stability Program sent to parliament today.
In the macroeconomic scenario of the Stability Program (SP) 2024-2028, the government estimates that the Harmonized Index of Consumer Prices (HICP) will drop by almost three percentage points in 2024 compared to 2023 (falling from 5.3% then to 2.5%), with a further drop to 2.1% in 2025.
In the document, the government states that inflation in 2024 will rise temporarily at the start of the year, reflecting the end of the zero VAT measure, the rise in electricity prices in January and base effects.
“Even so, the process of reducing inflation will continue, with underlying inflation decreasing throughout the year, reflecting the continued easing of external price pressures, as well as the effects of the monetary policy normalization process,” he points out.
In the following years and until the horizon of the projection, the government led by Luís Montenegro expects inflation to fall back to 2.0% – in line with the European Central Bank’s target.
The inflation projection for 2024 included in the EP is a far cry from the 3.3% projected by the previous government when it presented the 2024 State Budget (OE2024) in October, but it is in line with the expectations of several bodies that have already updated their projections this year, namely the Bank of Portugal (BdP), with 2.4%; the Public Finance Council (CFP), with 2.6%; and the European Commission, with 2.3%.
The International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD) point to 3.4% and 3.3% respectively, but these projections were presented in October and November of last year and have not yet been updated.
The Stability Program 2024-2028 was delivered by the government to parliament today, a document based on unchanging policies, which does not yet include the impact of the measures set out in the new executive’s program.
The Stability Program was approved by the Council of Ministers on Wednesday and will be discussed in Parliament on the 24th.
