The International Monetary Fund (IMF) once again analyzed the Portuguese economy and left several warnings to the government, including recommendations related to taxes, the job market and public support. Among the measures mentioned is the Youth Income Tax, the continuity of which is called into question in the institution’s most recent technical report.
The conclusions arise within the scope of the periodic assessment carried out by the IMF on the Portuguese economy, at a time marked by inflation pressure, energy costs and forecasts of economic slowdown.
IRS Jovem among the criticized measures
According to the portal, IMF technicians recommend that the executive avoid widespread tax cuts and review some measures currently in force. Among the policies identified are the IRS Jovem, the reduction of VAT on restaurants and the public guarantee associated with real estate credit.
The international organization considers that the Portuguese tax system should become simpler and more efficient, reducing exemptions and benefits considered excessive. According to the same source, one of the priorities is increasing revenue through tax simplification.
Energy and taxes at the center of concerns
Another point highlighted in the report is related to energy prices and the way they should reflect on the economy. The IMF understands that increases in energy costs must continue to reach the end consumer to preserve market signals and limit demand. The publication adds that technicians advocate more targeted support for low-income families and struggling businesses, rather than comprehensive reductions in the ISP or other taxes linked to fuel.
The report also addresses the functioning of the Portuguese labor market and suggests changes to open-ended contracts, at a time when the topic of labor legislation continues to generate political discussion. The IMF also considers that more flexible permanent contracts could encourage their use, reduce labor segmentation and improve the distribution of resources between companies and more productive sectors.
Aging increases pressure on public accounts
Technicians also point to the aging of the population as one of the main challenges for the country’s financial sustainability in the coming years, especially in terms of social spending. It is worth noting that the increase in pension and health costs could create significant pressure on the State budget, forcing new measures to contain and reorganize public spending.
The IMF also recommends more efficient management of public investment, defending mechanisms that allow reducing costs and increasing the economic impact of projects financed by the State. The objective is to improve economic growth without compromising fiscal balance, at a stage in which Portugal remains dependent on European funds and structuring investment.
War in the Middle East worries IMF
The report also warns of the economic effects of a possible worsening of the conflict in the Middle East, especially with regard to energy prices and inflation. In a more severe scenario related to the war with Iran, inflation could reach 4.2% later this year and rise to 5.7% in 2027.
24 Notícias recalls that the governor of the Bank of Portugal, Álvaro Santos Pereira, had already anticipated a more difficult economic scenario if energy costs remain high for a long period. The official pointed to a possible slowdown in economic growth to 0.8%, reinforcing fears about the prolonged impact of international instability on the Portuguese economy.
Also read:
