Portugal says to breach deficit target this year

Portugal is set to breach its public deficit target this year after new accounting rules forced it to raise its forecast to 4.8 percent of economic output, official data showed on Tuesday.

Portugal exited its international aid programme in May but is still struggling to rein in its public finances in line with EU rules.

Public deficit is now expected to reach 4.8 percent of gross domestic product (GDP) in 2014, above its target of 4.0 percent, according to its national statistics office.

Finance Minister Maria Luis Albuquerque only this month pledged that Portugal would meet its deficit target “without the need for further spending cuts or tax increases”.

The Constitutional Court has several times rejected planned new austerity measures, hampering government efforts to reduce spending.

The upward revision comes after Portugal revised how it calculates its public debt to include some state-backed companies, in accordance with new EU rules.

The deficit is now expected to reach 8.3 billion euros ($10.4 billion), of which 1.3 billion euros — or 0.74 percent of GDP — is linked to debt held by public transport companies.

But the new standards also allowed Lisbon to downgrade its public debt estimate, which is now expected to be 127.8 percent of GDP this year, rather than the 130.9 percent previously forecast.