Budget watchdog UTAO (full title: Technical Budget Support Unit) is querying the government’s forecasts for employment growth and prices in 2027, highlighting discrepancies with recent data.
In its analysis of the proposed State Budget for 2027 (OE2027), UTAO points out that the forecast of 1.4% employment growth in 2027 “is difficult to reconcile with the recent slowdown in net immigration”.
The Ministry of Finance (MF) “assumes growth in the working-age population of 0.6% in 2026 and in 2027, which already incorporates some slowdown, but projects growth in the labour force of 1.3% in 2027, which requires an increase in the participation rate to 70.2% (+0.5 p.p., 69.7% in 2026)”, says the analysis, stressing that the “most recent data” points in the opposite direction.
“The working-age population increased, on average, by 28,000 people per quarter in 2025 and only 10,000 in 2026, which should reflect a lower net migration balance”.
“The MF’s forecast is the highest among the reference institutions (between 0.4% and 1.3%, BdP: 0.7%) and its realisation depends on continued increases in participation and the maintenance of positive net migration balances”, UTAO explains, meaning that, if employment grows less, the tax and social contribution revenue bases will fall below forecasts.
In addition, the watchdog also questions price forecasts, given that the inflation forecast by the MF for 2027, measured by the HICP, is 2.3%, “placing it at the lower end of reference projections and matching those of the EC and the IMF (Article IV, June 2026”.
“The CFP [Public Finance Council] considers this forecast not very consistent with the technical assumptions of the scenario itself: the MF assumes for 2027 the highest oil price among the institutions considered in the opinion (86 dollars per barrel, compared with 79.2 dollars on average) and the smallest reduction compared with 2026 (−7.1%, against reductions between −9.8% and −19.7% in the others), but projects inflation equal to the lowest of the point forecasts”, UTAO continues.
The unit also adds a caveat regarding oil prices, pointing out that for 2027 the assumed Brent price “is close to or above the forecasts of national institutions (Bank of Portugal and CFP), but below what the most recent futures indicate” .
“This difference highlights the risks associated with the persistence of the energy shock”, UTAO warns, noting that “if prices remain at current levels, inflation and the energy bill will be higher than forecast.”
As for economic growth, the body considers that the Finance Ministry’s estimate for 2026 “is compatible with the growth already observed and implies a slowdown in the 2nd half”.
“To achieve the 2.3% forecast for 2026, growth of 1.0% in the 2nd half compared with the first is sufficient, that is, around 0.3% quarter-on-quarter in each of the last two quarters, approximately half the average pace of the 1st half (0.55%), with economic activity stagnating in the 2nd half, annual growth would be around 2.1%”, UTAO concludes.
For 2027, the government forecasts real GDP growth of 2.1%, “with the smaller contribution from domestic demand partially offset by an improvement in the contribution from net exports”.
“Private consumption, public consumption and investment are expected to grow at a more moderate pace, with the slowdown more pronounced in investment”, UTAO notes.
The proposed Budget forecasts economic growth of 2.3% this year and 2.1% in 2027 and balanced accounts this year and a surplus of 0.1% in 2027.
The proposal will be debated and voted on in general terms between October 27 and 28 October. The final overall vote is scheduled for 24 November, following a detailed debate process.
UTAO’s questions are not alone. Former finance minister Mário Centeno has already had his say, and articles are appearing in other media outlets, questioning whether there are mistakes in the ‘contas certas’ (balanced accounts).
Source: Noticias ao minuto