For the EU executive, Portugal has also "made limited progress on the structural part of the budgetary recommendations [...] and therefore invites the authorities to accelerate progress".
The European Commission urged the Portuguese government on Tuesday to “take the necessary measures” so that the 2023 budget is “consistent” with fiscal prudence, warning of “risks” in the deficit and debt by family support.
“The Commission invites Portugal to take the necessary measures within the national budgetary process to ensure that the budget for 2023 is consistent with the recommendation adopted by the Council,” the EU executive said in its communication with the overall assessment of the draft budget for next year, published today.
Taking into account the draft budget for 2023 Lisbon sent to Brussels and the Commission’s autumn forecast, the institution pointed out that it estimates in Portugal next year “that the growth of current expenditure financed at the national level will be close to potential output growth in the medium term, assuming the planned reduction of measures in response to high energy prices, including in temporary and targeted support for vulnerable households and businesses.”
“Therefore, the growth of primary current expenditure financed at the national level risks being out of line with the Council recommendation,” Brussels points out.
The Council recommendation of mid-July said that Portugal should, in 2023, “ensure prudent fiscal policy, in particular by limiting the growth of domestically financed current primary expenditure below potential output growth in the medium term, taking into account the continuation of temporary and targeted support to households and firms most vulnerable to energy price increases and to those fleeing Ukraine.
In its Communication released today, the European Commission states that it “believes that the draft budget plan of Portugal risks being only partially compliant with the budgetary guidelines contained in the Council recommendation” as, although the country “rapidly implemented energy measures as part of the emergency policy response to the exceptional energy price rises, a prolongation of existing support measures and/or an enactment of new support measures in response to high energy prices would contribute to further growth in nationally financed net current expenditure and an increase in the projected public deficit and debt in 2023.”
“It is therefore important that member states better focus these measures on the most vulnerable households and exposed businesses to preserve incentives to reduce energy demand and that they are withdrawn as energy price pressures ease,” Brussels insists.
For the EU executive, Portugal has also “made limited progress on the structural part of the budgetary recommendations […] and therefore invites the authorities to accelerate progress”.
The Council recommended to Portugal in mid-July that in 2023 it should pursue “a fiscal policy that aims to achieve prudent fiscal positions in the medium term and ensure a credible and gradual reduction in debt and fiscal sustainability in the medium term through gradual consolidation, investment and reforms.”
In mid-October, the Government delivered the draft budget for 2023 to Parliament, which forecasts that the Portuguese economy will grow by 1.3% in 2023 and record a budget deficit of 0.9% of Gross Domestic Product (GDP).
The European Commission today published the European Semester cycle of economic policy coordination 2023, which is based on the autumn economic forecasts released in mid-November.
In these forecasts, the European Commission anticipated for 2023 in Portugal a deficit of 1.1% of GDP, economic growth of 0.7%, public debt of 109.1% of GDP and an inflation rate of 5.8% in 2023.