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Portugal says beating deficit forecast

Published on 15/02/2017

Portugal said on Wednesday its 2016 public deficit will come in at less than 2.1 percent of its economic output, a lower ratio than it previously forecast.

“The 2016 deficit will be the lowest in our democratic history and will not be above 2.1 percent,” Finance Minister Mario Centeno told a parliamentary commission.

Prime Minister Antonio Costa said last month that the country’s deficit in 2016 would not be higher than 2.3 percent, back under the European Union limit of 3.0 percent and its lowest level since Portugal returned to democracy in 1974.

The final figures for Portugal’s public deficit, which includes spending by all levels of government and social services, will be published on March 24.

Portugal’s public deficit shot up into the double digits during the global economic crisis, and despite an international bailout it had difficulty bringing it back down to 4.4 percent in 2015.

The government argues last year’s drop should allow Portugal to meet, without difficulty, its obligations to Brussels and exit the excessive deficit procedure under which the EU steps up monitoring of member state budgets.

The European Commission estimated Monday that Portugal’s deficit came in at 2.3 percent of economic output in 2016 and would fall to 2.0 percent this year.

“Public finances are benefitting from the continued recovery and one-off revenues,” it said in its latest forecasts for the Portuguese economy.

Portugal’s economy expanded by 1.4 percent in 2016, the national statistics institute said Tuesday, after growing by 1.6 percent the previous year on the back of stronger exports and private consumption.

The government had forecast the economy to expand by just 1.2 percent in 2016.

Costa was sworn in at the end of 2015 and his minority Socialist government is reversing state salary cuts faster than the previous administration proposed to put more money in the pocket of consumers, while increasing indirect taxes.

The government’s looser spending plans have come up against resistance from eurozone policymakers who fear it will lead Portugal to infringe fiscal targets.