Public sector budget deficit seen below 3% of GDP in 2023

Portugal’s government expects the public sector budget deficit to be below 3% of gross domestic product in 2023, the year in which the fiscal rules of the European Union’s budget treaty – including a deficit ceiling of 3% of GDP – will be in force again, the minister of finance, João Leão, said on Tuesday.

“Let’s hope that the deficit will return below 3% in 2023, the year in which the rules of the budget treaty will again apply,” Leão told journalists, at a news conference to present the government’s draft State Budget for 2022.

However, the government has not indicated a specific figure for the 2023 deficit, with the text now presented only containing deficit forecasts for 2021 and 2022.

This year the deficit is projected at 4.3% of GDP; this is expected to fall to 3.2% next year, according to the text.

The 2022 figure had already been put forward to political parties, while the 2021 figure is slightly down from the 4.5% forecast in the government’s Stability Programme, submitted to EU officials in April.

“The budget deficit will be 3.2 per cent of GDP, as forecast in the Stability Programme and starting from an estimated deficit of 4.3 per cent in 2021,” the government’s budget website states.

On Monday night, with just minutes to spare before the midnight deadline, the government submitted the budget bill to parliament.

The text foresees GDP growth of 4.8% this year and 5.5% next, as well as a drop in the unemployment rate to 6.5% – noted as “the lowest level since 2003.” Public indebtedness is seen falling to 122.8% of GDP by the end of next year, down from an estimated 126.9% this year.

The first reading in parliament of the budget bill is to take place between 22 and 27 October, with the final reading and vote scheduled for November 25.