PM insists 2016 deficit target will beaten

8597Portugal’s Prime Minister, António Costa, expects the 2016 deficit to stay "comfortably below 2.5%"

The prime minister today accused the parties that made up the former ruling coalition (PSD and the CDS-PP) of systematic failure in forecasting now that they are in opposition.

Costa said that since 2015 his Socialist government has been reversing the trend of economic slowdown and insisted that the 2016 year-end deficit will be better than the agreed target:

"The European Union has set us a goal of having a 2.5% deficit and we can now say that we will have a deficit comfortably below 2.5%.

António Costa was addressing reporters at the end of a reception for the Paralympic Delegation of Portugal in the Coach Museum in Lisbon.

The prime minister latched onto the latest data from the National Institute of Statistics which showed that the Portuguese economy grew 0.9% in the second quarter of this year compared to the same period in 2015 - and 0.3% over the previous quarter.

Asked about the opposition’s claims that the socialist economic model is not working, António Costa said: "The data we now have shows that, fortunately, we are reversing, albeit slightly, the 2015 trend of deceleration. The country suffered four years from a brutal economic shock that set growth, employment and investment back decades. It’s now necessary to make an increased effort."

"The opposition failed in government and now systematically fails when making predictions in opposition," said the buoyant prime minister, pointing to positive employment data and rising confidence levels.*

According to the PM, it is necessary to "accelerate the factors that contribute to the growth of our economy: the further replacement of household income and to implement the programme which we approved so that companies have better investment conditions and for us to accelerate the implementation of EU funds."

Costa pointed out that German companies such as Volkswagen, Bosch and Continental were stepping up investment and that increased internal demand, boosted by tax cuts, the reversal of public-sector wage reductions and other anti-austerity measures will rekindle growth in the second half of this year.

Exports affected by a slowdown in Angola, Brazil and China are beginning to pick up and tourism is booming. The government is expecting an injection of EU aid after unblocking bottlenecks which have held up allocations of structural funding.

“The stabilisation of the finance sector will help the economy,” Costa said. “We are confident things are picking up … the economy is recovering growth.”

It is part of the PM’s job description to focus on the positive and skirt around the negative: in the regard, today's delivery was faultless.

Continuing in this vein, Costa promised that the 2017 State Budget will not have any further cuts in pensions, will continue reverse the current cuts and will show an increase in spending on education, health and culture “which are decisive for our collective futures," and to pursue a strategy of collecting taxes.

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* The Portugal Resident comments in 'Economic Sentiment Indicator falls for second consecutive month' (August 31, 2016)

According to new data from the European Commission, Portugal’s ‘Economic Sentiment Indicator’ fell for the second consecutive month in August, in line with feelings logged throughout the eurozone.

The fall reflects “dwindling confidence in all sectors of business, except that of construction”, says Lusa. Portugal is joined in this lack of confidence by Holland (down 3.6 points), Italy (-2.1), Spain (-1.5) and Germany (-1.1).

The only significant country to show a positive tendency was France, where economic sentiment was up 0.8 points.

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