LISBON: The Portuguese government is seeking to turn a 2.2 percent budget deficit forecast for 2016 into a 0.4 percent surplus by 2020, the timeframe of the Stability Programme recently approved by the cabinet. The document foresees a steady slide in the state deficit, dropping to 1.4 percent of GDP next year before sliding to 0.9 percent in 2018 and 0.1 percent in 2019 with the 0.4 percent surplus coming in 2020, the final year of the programme’s scope and already beyond the mandate of the current António Costa-led government.
The document states that this improvement in the state’s financial positioning will come about by a 3.5 percent cut in expenditure, targeting human resource costs, social security payments, intermediate consumption and interest charges, but will be accompanied by a 1 percent fall in state revenues, with 0.7 percent coming from lower fiscal rates with all figures being a percentage of GDP.
The fall in social security payments stems from “the lower weighting of pensions paid out to former state employees, the reduction in expenditure on unemployment subsidies and greater control and inspection in the awarding of social security within the overall plan to combat fraud and tax evasion.”
The Programme also details the government’s ‘plan B’, a Brussels requirement in case the budget deficit for 2016 begins to widen with the document stipulating that such an eventuality would trigger a 0.19 percent cut in expenditure, saving around €350 million. Whilst the government maintains its policy of not hiking either personal or company tax rates or raising VAT under the plan b scenario, the document does state that it would bring in rises to taxes and levies on fuels, vehicles, tobacco and alcohol.
The document also states government hopes to dispose of financial assets over the course of this year, in Novo Banco and what remains of Banif bank, to cut state debt back to 124.8 percent of GDP this year, down 2.9 percent on its 2016 state budget forecast, with the 2020 goal of getting this down to 110.3 percent.
The wide reaching document also spans the respective sectors of the economy with the government revealing its plans for the transport sector for example, These include investing €485 million in expanding the metro systems in Lisbon and Porto by a total of nine kilometres, renewing bus fleets and launching a shared bike system.
There is also €16.6 million in funding allocated to decarbonising the national taxi fleet with some 1,000 taxis now due for replacement by electricity powered alternatives coupled with a major expansion in national recharging points. The primary state budgetary balance, which excludes interest rate payments on the pile of state debt, remains positive throughout this period, rising from a forecast 2.2 percent for this year up to 4.2 percent in 2020 at the end of the programme’s timeframe.
