The Technical Unit for Budget Support estimates that Portugal’s deficit is running currently at 4.9% which casts grave doubts that the government target can be met by the year end.
In its analysis of the budget performance to July, the Unit concluded that the budget deficit is way over target and that is will ‘hardly be possible’ to hit the government’s 2.7% commitment, or even the even the 3.2% forecast from the European Commission.
The Technical Unit reports that even though the state budget for 2015 included a margin of error that can be accommodated by using the contingency reserve fund and the budget reserve, the results to July reveal that it will be very difficult to reach the 2.7%.
"Despite the fact that the fiscal performance of the second half is often more favorable than that seen in the first six months of each year, the size of the deviation jeopardises the fulfillment of the annual deficit target," write the experts in a damning assessment of the government’s performance.
The Unit stated also that the second half of the year may be even more unstable than in previous years because of the general election, "which in itself tends generate uncertainty around the fiscal performance compared to other periods."
Everything seems to be heading in the wrong direction despite the government’s assurance that the economy is powering out of recession and tax revenues are booming.
The fact is that tax revenue is "advancing at an insufficient pace compared to the revenue budgeted for in the State Budget," and at the same time there has been an "increase in spending on the procurement of goods and services" and "an increase in (public sector) personnel expenses," exposing the government's assurance that the public sector is contracting as being far from accurate.
This data will come as no surprise to the Treasury which, hand in hand with the office of the prime minster, now will throw a blanket of confusion over the figures and concentrate its PR activity on export performance and the recent encouraging drop in the unemployment figures - even though these figures have been exposed as inaccurate and purposefully fudged.
Any glimpses of the brighter aspects of economic life will not hide the economy's underlying performance which is well below the State Budget target. This has been shown at the half year point to be no more than an over-ambitious wish list in this election year.
