The Portuguese economy will grow by 4.8% this year, matching a government forecast before the recent spike of Covid cases throughout Europe, according to the country’s finance minister.

Joao Leao, from the Socialist government facing a snap election at the end of next month, told Reuters news agency that Portugal’s budget deficit may fall marginally short of the 2021 target of 4.3% of GDP, bolstered by higher tax revenues and a robust labour market.

In 2020 the deficit rose to 5.8% as a result of measures introduced to provide help to families during the pandemic, while the economy slumped 8.4%, the worst recorded contraction since 1936.

"Portugal is in a phase of clear recovery. The economy doesn't seem to be affected by the new wave of the pandemic ... we are confident that we will grow around 4.8% this year," Leao said.

Portugal’s public debt is back on a downward path, which was disrupted last year when it reached a record 135% of GDP, which according to Leao was "very important to give confidence and credibility" to investors.

He added that Portugal must regain political stability and governability in the 30 January election to maintain growth and ensure it can undertake investments financed by the European Union’s pandemic recovery fund.

Leao added that Portugal was conforming with all targets agreed with Brussels and no difficulties were forecast in regard to the approval of additional recovery funds – worth €1 billion – which should be received in Q1 2022.

The finance minister added that he predicts the European Central Bank to purchase more bonds through its Asset Purchase Programme to allow for a "smooth transition" when the Pandemic Emergency Purchase Programme reaches a conclusion in March, maintaining monetary policy stimulus as the Omicron variant impacts the economic outlook.