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Portugal achieves huge reduction in Q1 budget deficit

Portugal, which has just emerged from a bailout programme, nearly halved its budget deficit in the first quarter of the year relative to national output, official data showed.

LISBON: Portugal, which has just emerged from a bailout programme, nearly halved its budget deficit in the first quarter of the year relative to national output, official data showed on Friday.

The ratio of the public deficit to gross domestic product fell from 10.0 per cent at this time in 2013 to 6.0 per cent, the national statistics institute Ine said, marking a big step in a still uncertain climate over the outlook for public finances.

This big improvement in the Eurozone country, which emerged from a bailout programme in May, was driven by a 5.4 per cent cut in public spending and 3.2 per cent rise in revenues.

In absolute terms, the public deficit, covering central and local government and welfare budgets, fell from 3.9 billion euros to 2.4 billion.

Under the remaining terms of its 78 billion euro (US$106 billion) rescue by the International Monetary Fund (IMF) and European Union (EU), Portugal must cut the deficit to 4.0 per cent of output this year and to 2.5 per cent next year.

For the whole of last year, it brought the deficit down to 4.9 per cent which was far better than the target of 5.5 per cent set by the IMF and EU.

To keep on track for its targets, the centre-right government had included further cuts in pay for civil servants in its 2014 budget, but at the end of May the Constitutional Court struck down this measure.

Other aspects of the budgets are also being challenged, and the government has decided to await the outcome of those cases before deciding on alternative measures, and despite the risk that this could increase uncertainty about its ability to meet the targets.

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