Pandemic measures worsened deficit by 2.6% until September

  • Lusa
  • 25 January 2022

According to the Technical Unit for Budgetary Support (UTAO), the measures adopted to respond to the pandemic have worsened Portugal's budget deficit by about 2.6% of GDP.

The measures adopted to respond to the impact of the pandemic have worsened Portugal’s budget deficit by about 2.6% of GDP, according to the Technical Unit for Budgetary Support (UTAO), released on Tuesday.

The parliament experts explain that most of the policy measures that worsened spending, corresponding to 3.1% of GDP, are concentrated on subsidies (1.5% of GDP) and social benefits (0.6% of GDP), “reflecting measures to support employment and family income, respectively.

UTAO also explained that the definitive loss of revenue recognised in the measures to suspend tax and contributory executions temporarily, corresponding to -€169 million (- 0.1% of GDP), as well as additional revenue from covid-19 measures from the European Union, corresponding to €1,016 million, also contributed to this result.

It also indicates the influence of recording the provisional revenue for the first three-quarters of the additional solidarity revenue on the banking sector, amounting to €25 million.

“The legislator justified the creation of this tax with the need to devote new resources to the fight against the pandemic. However, the revenue was consigned to the Social Security Financial Stabilisation Fund, which indicates a different political intention, the intention to make it a permanent financing instrument for the Social Security pension system,” the report points out.

The parliamentary experts pointed out that the value of the impact of the measures compares with the direct effect of – €4,408 million (- 2.8% of GDP) on the overall balance in public accounting in the same period, “translating into a difference of €399 million”.

“This direct budgetary impact does not include the guarantees granted by the General Government to other institutional sectors in the context of the response measures to the covid-19 pandemic, which constitutes contingent liabilities,” the report further reads.