Q1 deficit 0.4% of Portugal’s GDP

The budget deficit stood at 0.4% of Gross Domestic Product (GDP) in the 1st quarter, Statistics Portugal (INE) said on Friday.

“Taking quarterly figures as a reference and not the year ended in the quarter, the balance in the 1st quarter of 2022 reached -€233.6 million, corresponding to -0.4% of GDP, which compares with -6.0% in the same period last year,” according to INE’s quarterly national accounts by institutional sector.

Economists heard by Lusa had forecast a slight budget surplus in the first quarter, reflecting an improvement in economic activity and a decrease in pandemic spending.

According to data released today by INE, in the first quarter of the year, the improvement in the budget balance in comparison with the same period of the previous year was due to an increase of 11.9% in total revenue and a decrease in total expenditure of 1.4%.

On the expenditure side, there was a 2.4% decrease in current expenditure due to a 12.6% drop in interest expenditure and a 77.8% drop in subsidies paid “due to a reduction in support paid to companies”.

On the other hand, expenditure on social benefits and personnel increased by 3.9% and 3.8%, respectively, while intermediate consumption grew by 10.2% and other current spending by 1.7%.

Capital expenditure rose 21.4% due to the 21.3% growth in investment and 21.7% growth in other capital expenditure.

On the revenue side, there was a 12.1% increase in current revenue, with all of its components growing, except for other current income.

Taxes on income and wealth, taxes on production and imports, social contributions and sales grew by 11.6%, 25.1%, 8.2% and 13.0%, respectively, while other current revenue fell by 30.8%.

The 20.1% increase in tax revenue and 8.2% increase in social contributions “demonstrates the recovery of economic activity and the labour market compared to the same period of the previous year, marked by pandemic containment measures,” INE said.

Capital revenue fell 9.6%, mainly reflecting the decrease in revenue from European Union funds.

INE also notes that due to the fractional payment measures for taxes and social contributions taken in the context of the covid-19 pandemic, an adjustment was made to revenue for the period in which the payment obligation was generated.

“Considering the 1st quarter of 2022, this adjustment translated into an increase in tax revenue of about €90.1 million compared to public accounting data, referring to the measures to extend the payment of Social Contributions, VAT, PIT and IRC,” the institute indicates.

The budget balance on national accounts recorded a deficit of 2.8% of GDP in 2021.

The government forecasts a deficit of 1.9% of GDP for the year as a whole.