Portugal maintains excessive deficit in 2015

26 August 2015

Portugal should remain in a situation of excessive budget deficit until at least 2016, although the economic recovery is consolidating, indicate the spring economic forecasts released on Tuesday by the European Commission.

The Commission indicates that the budget deficit should fall to 3.1 percent of gross domestic product this year, down a tenth from what was forecast in February, albeit still 0.4 percentage points above the government’s forecast.

The upward revision compared to the last forecast is solely due to improved economic conditions and not to any additional effort, as the budget consolidation plan does not account for more than 0.5 percent of GDP, the Commission justifies.

The government affirms that the budget deficit will be 1.8 percent in 2016, while the Commission forecasts 2.8 percent. However, the European Commission’s figures are based on a scenario in which measures not yet unapproved or with a high likelihood of being implemented are not considered.

The spring forecasts indicate that Portugal’s economy is accelerating and consolidating and should grow 1.6 percent this year and accelerate to 1.8 percent in 2016, again driven mainly by internal demand.

The Portuguese government forecasts economic growth of 1.6 percent this year and 2 percent in 2016.

Imports grew at a higher pace than exports, meaning that exports weighed negatively for the first time since 2010, though this should disappear with the European economy’s upswing and devaluation of the euro, the Commission adds.

The indicators are generally positive. Corporate income tax reform has helped improve the business environment and should help boost private investment, while depreciation of the euro and the European Central Bank’s flexible monetary policy help balance risks to these projections. (Macauhub/PT)