Portugal's central bank believes the government can achieve its official 2022 target for the public sector budget deficit relative to gross domestic product, of 1.9%.
The Bank of Portugal has said that it sees scope for the government to achieve its official 2022 target for the public sector budget deficit relative to gross domestic product, of 1.9%, thanks to buoyant tax revenues, despite spending measures being taken to mitigate the impact of inflation on consumers.
In its October Economic Bulletin, released on Thursday, the central bank explains that for the deficit ratio to be 1.9%, as pencilled into the 2022 state budget, a year-on-year deterioration of three percentage points would be needed in the second half of the year, excluding temporary measures.
It notes that, together with spending associated with the pandemic, current measures to mitigate the effects of price increases are set to have an impact on the budget balance in 2022 that is “slightly lower than [those] in 2020 and 2021” and are more concentrated in the second half of the year.
It thus concludes that “in the favourable context for the evolution of tax revenue, even considering the budgetary impact of these policy measures estimated at around 3.2% of GDP in the second half of the year, there is sufficient margin to meet the official target.”