Public Finance Council regards the first quarter deficit as a positive indication

The Public Finance Council (CFP), entity headed by Teodora Cardoso, gave a positive review to the performance of public finance in the first quarter of this year. Since the first three months of the year are usually the worse for the deficit, the 2.1% INE registered are a “positive indication” that the year 1.5% goal predicted in the 2017-2021 Stability Programme can be achieved. CFP considers, however, that there are still uncertainties about this achievement, since the impact of CGD’s recapitalization is still unknown of.

In the report disclosed this Wednesday about the budgetary evolution in the first quarter of 2017, CFP says “caution” must be taken into consideration when making year or quarterly comparisons; nonetheless, CFP highlights this is the smallest deficit, in a percentage of GDP, of all first quarters since 2013. This result was achieved by an increase in income, namely with indirect taxes and social contributions, as well as a weaker growth in expenses.

In addition, CFP highlights that “the 3.6% nominal homologous increase in the GDP contributed to the decrease in the deficit in reference to GDP”. Gross Domestic Product increased 2.8% in the first quarter, according to Statistics Portugal (INE).

Given the history of high deficits in the first quarter of the year, the entity headed by Teodora Cardoso considers the “result can be seen as a positive indication that the goal set by the Government in the budgetary deficit will be met”. However, CFP signals that situation “cannot be taken for granted, since each budget year presents idiosyncrasies in the within-year execution of revenue and expenditure”. One of those idiosyncrasies is the unknown impact of the recapitalization of Caixa Geral de Depósitos on public accounts.