Portugal at risk of returning to a deficit

PORTUGAL AT RISK OF RETURNING TO A DEFICITThe Bank of Portugal have warned that the measures that have been approved recently put the country at risk of recording budget deficits again in the coming years, according to the June Economic Bulletin, released this month.

The June Economic Bulletin has forecasts for public accounts. However, according to the Bank of Portugal, “the approval and announcement of new measures with a budgetary impact in the weeks prior to the publication of this bulletin, conditions the assessment of the situation of public finances in Portugal in the coming years”.

The central bank even states that “the magnitude of these measures and their nature”, due to the impact of reduced revenue and/or increased expenditure, imply a reduction in the budget balance, with the consequence being the risk of a return to budget deficits.

“With the information available, a return to a deficit situation is expected, putting at risk the desirable trajectory for public expenditure within the scope of the new European budgetary rules”, reads the report.

In 2023, the budget balance was positive at 1.2% of Gross Domestic Product (GDP).

Already questioned by journalists about the return to deficit, Centeno said that a balance will only be effectively calculated after the budgetary exercise, and that until then there are other impacts that will have to be taken into account, such as the lagged budgetary impact and compensation measures that can be considered.

Even so, he spoke of several measures that prove to be problematic from a budgetary point of view, such as tax reductions and salary negotiations in public administration.

“If the compensation measures do not appear, our assessment is that there is no budgetary margin for what is being presented,” said Centeno.

The former Minister of Finance of the PS Government said that economic policies must be “prudent and countercyclical”, including budgetary ones.

Source Lusa - Photo courtesy of Depositphotos.com

Pin It