Economy. Times of uncertainty

The economy could slow down in the third quarter, despite a strong start to the year. This warning comes from European Central Bank (ECB) President Christine Lagarde, justifying this behavior by the uncertainty surrounding tariffs and their impact, despite the recent trade agreement between the European Union and the US, which avoided a scenario of higher tariffs but still leaves some strategic sectors, such as pharmaceuticals, which the ECB will consider in its upcoming decisions, on hold. This fear is shared by economists interviewed by Nascer do SOL.

"The slowdown seems quite plausible, although that could mean very different things. Uncertainty is the backdrop, which doesn't really say anything definite. It just means we don't know," explains João César das Neves, for whom "this whole tariff saga is gigantic nonsense, generated by sheer ignorance—the arguments used were refuted in the 18th century—and no one even knows what tariffs will actually be applied." Still, the economist admits that, "in any case, amidst the uncertainty, one thing is certain: no economy will win, and the main victim will be the American economy."

Banco Carregosa economist Paulo Monteiro Rosa also believes the ECB's warning should be understood as a sign of caution regarding the evolution of the Eurozone economy. "Despite a positive start to the year, Christine Lagarde emphasized that signs of a slowdown are already anticipated in the third quarter. This inference reflects not only the uncertainty of the international context, marked primarily by trade and geopolitical tensions, but also the domestic impact of weaker demand in some sectors," Monteiro Rosa told our newspaper, emphasizing that "the ECB is thus seeking to prepare not only the markets, but also all economic agents, especially businesses and families, for a phase of more moderate growth, while maintaining confidence, noting that it has the tools to respond should the situation worsen."

This uncertainty regarding the evolution of inflation, economic growth, and international trade will be taken into account by the ECB before making new monetary policy decisions. "For the ECB, this uncertainty means that the economic outlook remains fragile, as new protectionist measures or tariff adjustments could directly influence the competitiveness of European companies, trade flows, and, ultimately, inflation trends. Therefore, Lagarde emphasized that this factor will be taken into account in upcoming monetary policy decisions," she adds.

Goals may be compromised

If the slowdown in the Eurozone economy is confirmed in the third quarter, it is natural that Portugal's economic goals could, in fact, be called into question.

Paulo Monteiro Rosa points out that, "as a country strongly integrated into European markets, Portugal is particularly sensitive to declines in external demand, particularly in exports of goods and services, such as tourism and manufacturing."

And the risks don't end there. According to the economist, uncertainty surrounding trade tariffs and the global slowdown could affect investment and business confidence.

Still, he remains optimistic: "The resilience demonstrated so far, based mainly on a dynamic labor market, driven by the increase in the employed population of around 15% since 2013, tourism, foreign investment, and the use of European funds, can help mitigate the most negative effects and maintain, at least in part, the economic objectives outlined by the Portuguese government."

António Nogueira Leite, in an interview with Nascer do SOL, had already acknowledged that "relatively modest growth was anticipated, as has been the case in Portugal and even more so in central Europe." He explained: "It seems we've all lowered our ambitions in Europe because we're already content with a 2% rate these days."

Nogueria Leite laments the fact that Portugal has abandoned its ambition to catch up with the best examples in Europe. "Sometimes, the President of the Republic would exult in 2% growth. Now, 2% is nothing because we remain a long way from the countries of central Europe, and the ambition that was almost unanimous in Portugal 30 years ago—that we should gradually move closer to Europe—is now clearly not a mobilizing objective. Now, we are more focused on survival, on solving major problems that have been accumulating."

Attention turns to the Budget

The ECB's warning about a possible slowdown in the European economy, according to the Banco Carregosa economist, forces Portugal to prepare for a less favorable external environment, which could impact exports, investment, and tax revenue. Given this scenario, "the government is expected to adopt a more prudent stance, reinforcing fiscal resilience measures, but also ensuring selective support for the most vulnerable sectors," he states.

At the same time, Paulo Monteiro Rosa says it is "important to maintain space for strategic public investment, particularly through European funds, which will allow for sustained growth even in a context of less economic dynamism."

Less optimistic about the direction the political parties will take is César das Neves, who believes the discussion of the next budget "will also be a source of uncertainty, being the main piece of the partisan tragicomedy in which we are involved." He adds: "What the budget should address is the least of the concerns of the debates and the actors."

Nogueira Leite confesses that he would like Portugal to be able to "have good financial records without the need for subterfuge." However, he acknowledges that this is a difficult goal to achieve, "especially since in 2024 there were raises for many classes in the civil service," which translates into permanent increases in spending. "We'll have to be careful with this, and that's why I'm not talking about IRS reductions because I don't think there's any room for it. I'd love to. We have a huge tax burden, but I don't think there's much room for it. The focus, and I've been saying this for many years, but without any success, is on improving the functioning of services and thus containing spending," he emphasizes.

César das Neves notes that "the last elections demonstrated that the Portuguese are a bit fed up with turbulence every time we have a budget," noting that the "result was dramatic for those who tried to push the envelope." Regarding the government's position of not wanting to choose an exclusive negotiator from the outset, he finds it "reasonable," especially since, otherwise, exclusivity "would give that negotiator too much power."