João Leão says goodbye to the Ministry of Finance with a €672M surplus

The former Finance Minister and former Secretary of State for the budget has bid farewell to the Ministry where he was for six years with a budget surplus of €672 million by March. It is another “budgetary brilliance” in the career of João Leão who has achieved a deficit of just 2.8% of GDP in 2021, below the 4.3% projected in the State Budget for 2021 (OE2021). Data released by the Ministry of Finance this Thursday show that the General Government (GG) fiscal balance continues to progress in 2022, improving by €3,071 million year-on-year.

It should be noted that these are the figures on a cash basis. Later on, more specific until the end of march, the Budget General Directorate will publish the complete budget execution.

“Budget execution on public accounts recorded a surplus of €672 million in the first quarter of 2022,” the Ministry of Finance announces in a statement, noting that “compared to the first quarter of last year, a period in which economic activity was strongly affected by the lockdown, the balance improved by €3,071 million.”

More surprising is the difference in the public accounts balance compared to the same period in 2019, a year in which there was a budget surplus in the national accounts. “Taking by comparison the first quarter 2019, still without the effect of the pandemic, the balance has degraded by €170.5 million,” reveals the Ministry. This means that, at least in twelfths and at this start of the year, budget execution seems to be very close to the year of surplus. The Government’s goal underlying the new Budget proposal is to end 2022 with a deficit of 1.9% of GDP.

What justifies this positive evolution of the budget balance? “The evolution in the first three months of 2022 reflects the improvement in economic activity and in the labour market as well as the reduction in costs associated with measures to prevent and fight Covid-19,” explains the Ministry of Finance, specifying that revenue grows 15.4%, which compares with a 0.5% reduction in public expenditure. “Excluding the effect of expenditure associated to Covid-19, primary expenditure grew by 3% year-on-year,” the statement said.

The Ministry of Finance also reveals that “the primary balance, which excludes interest from the budgetary equation, was positive by €2,360 million,” which compares with a primary deficit of €616 million in the first quarter of 2021. Already in the first quarter of 2019 there was a primary surplus of €1,758.5 million.