Portugal’s government forecasts 4.8% economic growth in 2021, upwardly revised from the 4% predicted in the Stability Programme published in April.

The Finance ministry, with João Leão at the helm, stated "this evolution is largely due to the significant acceleration of investment compared to 2021 (+2.9 pp), as well as exports (+ 1.2 pp), which are expected to grow faster than imports.”

The budget proposal states that the public deficit is forecast to decline to 4.3% of GDP this year, edging down to 3.2% in 2022, reports The Portugal News.

The improvement is down to “the result of the gradual recovery of economic activity, the impetus for reforms and investments to be carried out within the scope of the PRR, measures to support the income of the middle classes, families and young people, and the reduction of costs associated with the emergency measures that it was necessary to implement at the height of the pandemic to sustain employment and income”, according to the proposal.

In addition, Portugal’s public debt ratio will improve in 2021, representing 126.9% of GDP, after hitting an all-time high of 133.7% last year.

The unemployment rate is also predicted to fall to 6.5% in 2022, the lowest level since 2003, compared to the estimated 6.8% for 2021.

In regard to taxes, the government said it will implement "an ambitious programme aimed at improving the income of families through an IRS package that incorporates several measures aimed at the middle classes, families with children and young people, and a significant increase in allowances for families".

In order to boost private investment, the government is planning to launch the Tax Incentive for Recovery (IFR) in the first half of next year, permitting businesses to deduct their investment amount, up to €5 million, from income tax collection.