Deficit may be slightly lower than expected in 2021, says João Leão

The finance minister is confident about the progress of Portugal’s public finances. Two weeks before the end of the year, João Leão said that the budget deficit could end up “slightly below” the target of 4.3% of GDP set in the State Budget for 2022 (OE 2022). In an interview with Reuters published on Thursday, the minister also said that the Portuguese economy does not seem to be affected by the new wave of the pandemic.

The 4.3% of the GDP foreseen in the State Budget for 2022 already represents a reduction from the 4.5% envisaged in the Stability Programme, but it should be remembered that the original last year’s state budget’s objective was 4.3%. After a deficit of 5.8% of GDP in 2020, a lower budget deficit in 2021 than expected, even when the Covid-19 wave at the beginning of the year, that brought increased costs for the state, was not expected, supported by higher tax revenues and a strong labour market.

After a historic contraction of 8.4%, the government remains confident of a GDP growth of 4.8% this year, in line with the Bank of Portugal, which updates its projections this Friday. “Portugal is in a phase of clear recovery. The economy doesn’t seem to be affected by the new wave of the pandemic … we are confident that we will grow around 4.8% this year,” João Leão assured. The public debt ratio should close the year at 126.9% of GDP, which is “very important to give confidence and credibility” to investors, he added.