- Portugal’s budget proposal, presented in mid-October, considers that it responds to the EC’s demands, by aiming to reduce the budget deficit to 2.4% of GDP this year. Moreover the government is forecasting to reduce it to 1.6% of GDP in 2017.
- Yet the draft budget’s growth assumptions are more favourable than those of the European Commission. The Commission is also less optimistic than the government concerning the expected impact of certain measures on the budget balance.
- While pointing out the risk that Portugal might fail to meet its commitments in 2017, the Commission nonetheless approved its budget proposal.
Last July, the European Commission opted not to sanction Portugal for failing to sufficiently reduce its deficit in 2015, on condition that the country fulfils its deficit reduction targets this year. In the budget proposal presented to the European Commission in mid-October, Portugal considers that it responds to the EC’s demands. Indeed, the draft budget calls for a budget deficit of 2.4% of GDP in 2016 (down from 4.4% of GDP in 2015). Moreover the government is forecasting to reduce it to 1.6% of GDP in 2017.
Overly optimistic growth assumptions
Even so, the European Commission issued a few reserves. Indeed, the government’s budget outlook must be treated with caution as it is based on more optimistic growth assumptions than those of the European Commission. The Portuguese government is forecasting GDP growth of 1.2% in 2016 and 1.5% in 2017, compared to the Commission’s estimates of 0.9% and 1.2%, respectively (see table and chart 1).
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by Catherine STEPHAN