Government insists “there will be no deficit”, but we are in an election campaign
Tucked well into the back pages today is the news that the “next government that results from the snap elections on May 18 will inherit a country with four consecutive years of deficit if the new incumbent in São Bento decides to maintain policies currently in place, taken during the last legislature”.
The alert comes from the CFP (Council of Public Finances) which forecasts that accounts will slip back into negative territory in 2026, and which doesn’t foresee any budgetary surpluses before 2029, reports Correio da Manhã.
None of this will come as a surprise to people watching what has been happening: the political struggles (between those that seek to remain in power, and those that seek to grab it) have seen all manner of measures brought in that inflate public spending and reduce revenue – making little financial ‘sense’ for a country seriously focused on keeping books balanced.
CFP concedes that the various decisions “were adopted by political actors, some by the government, others by parliament”. The back-and-forth haggling over the last State Budget being one of the principal reasons for pushing Portugal towards the red once more.
Specifically, CFP mentions IRS Jovem (tax perks for the under-35s); the lowering of IRC (the tax paid by companies), as well as increases in pensions. But there have been other decisions, adding to the weight of public spending.
“There is a danger of an inflexion in the trajectory of public debt”, says the council simply. “This would be worrying because it would signify a deterioration of the financial situation”, with impact on financing costs which would in turn “affect the risk profile of sovereign debt”.
All this came before the announcement yesterday that Portugal will be anticipating its target of defence spending equivalent of 2% of GDP by 2029… CFP stresses that even keeping to the 2029 timeline would “double negative balances in 2029”. And, of course, CFP’s forecasts have not accounted for the effects of tariffs looming from the United States.
But none of this will be ‘shouted from the rooftops’: the country is in the throes of another election campaign, where the main parties will be trying to persuade the electorate that they will have everything under control.
Only yesterday, economy minister Pedro Reis insisted “there will not be a deficit in Portugal, this is crystal clear”. ND
Source material: Correio da Manhã/
