IMF: Centeno achieves “comfortably” the 2017 deficit goal

  • ECO News
  • 30 June 2017

The Finance minister has an easier task on his hands: the acceleration of the economic growth will allow the 1.5% deficit goal to be comfortably met, IMF says.

The more favorable Portuguese economic cycle will be reflected on this year’s public accounts. Adding the commitment to control expenses, it will become easier for the Finance minister to achieve a 1.5% deficit in 2017. Mário Centeno’s goal should be “comfortably” met, is what experts from the International Monetary Fund (IMF) say in a preliminary document about the most recent monitoring mission between 19 and 29 June.

“The pickup in growth implies that this year’s headline fiscal deficit target of 1.5 percent of GDP is well within reach“, is stated in one of the preliminary conclusions. Nonetheless, the IMF experts tell the Portuguese Government they could use this possible budgetary pillow to make a “more ambitious” cut of the 2017 public debt. Predicting there will soon be a possible reduction in the monetary accommodation policy, the IMF states Portugal needs to take advantage of the “favorable cyclical conditions” to improve its financing conditions.

The IMF reinforces the idea that a “durable structural fiscal consolidation remains essential to ensure the sustainability of public finances”. However, that adjustment should be focused on reforms which “improve public spending efficiency”, a “more growth-friendly” way to control the deficit. IMF experts believe Portugal should reinforce investors’ perception that there is enough fiscal stability to foster investment.

The pickup in growth implies that this year’s headline fiscal deficit target of 1.5 percent of GDP is well within reach.

IMF

IMF also signals that Portugal leaving the Excessive Deficit Procedure was a decisive moment for the country. “The 2016 budget deficit was significantly better than expected, reflecting strong efforts to contain spending”, stated the IMF. This led to an improvement in the “market sentiment towards Portugal”, which contributed to an “accentuated” decrease in Portuguese interest rates since March.

The Portuguese Finance ministry states this IMF mission emphasized the “strengthening of the Portuguese economy”. The ministry further stated that growth will be based on private investment and exports, “resultant from an improvement in credit and an competitiveness increase in Portuguese goods and services”.

PUB