PS only exceeds PSD government investment in 2020 Government wants to go beyond Brussels in 2019 Other Services

The Commission has relieved the goal of a structural balance that the country has to meet in the coming years, but the Government intends to go beyond this requirement by 2019. At the same time, this ambition is lower than previously expected, also in the budget balance and in the public debt.

The government wants to go beyond European rules as early as 2019, reaching a structural surplus - the adjusted budget balance of the economic cycle and temporary effects - that is greater than the European Commission requires, in line with the targets set in the Stability Program 2019-2023.

Last week, Brussels decided to alleviate the target of the structural balance from 0,25% to 0% from 2020, an amendment that is not political but that follows from the European rules. In the Stability Program, delivered yesterday, the Government says not only that it will comply with the rule, but will overcome it.

In 2019, the Minister of Finance expects to achieve a structural surplus of 0.1% of GDP, improving against the structural deficit of 0.1% in 2018. This surplus is above the required 0%, ie Finance anticipates that Portugal will go beyond Brussels. Assuming it serves its purpose, Centeno did not need to make an additional structural adjustment thereafter.

However, in the following years, the goals indicate that the PS's intention for the next legislature will also be to go beyond European rules. The aim is to improve the structural surplus to 0.3% of GDP by 2020 and to maintain it at that level for the whole of the next legislature, ie until 2023.

In the stability program, the government explains that this improvement in the structural balance by 0.2 percentage points of potential GDP is based on "a reduction in structural expenditure (-0.9 percentage points) above structural revenue (-0.7 percentage points ) ".

Given the stability program of the past year it is possible to identify several differences. The first is that in 2018 Centeno expected to have a structural deficit of 0.6% instead of 0.1%. By 2019 he expected to have a structural deficit of 0.4% (0.3% in OE 2019) and not a surplus of 0.1% as he now says he will have.

Only in 2020, the government confirms that it intends to have a structural surplus of 0.3%. However, in last year's document, it predicted that this balance would improve further to 0.6% in 2021 and 0.9% in 2022, which is no longer the case with the update made this year. The objective now is to maintain the structural surplus at 0.3% of GDP.

In short, in the short term, the evolution of public accounts is more favorable than forecast by the Government last year, but the ambition for the following years is less.

The fact that the executive foresees to continue to meet the goal of the structural balance ends up freeing the country from a more demanding fiscal consolidation.

This is also reflected in the expected evolution of the budget balance. Although the Ministry maintains the budget deficit target for this year and continues to predict positive balances from next, those surpluses will be lower than predicted last year. The 2018-2022 Stability Program provided for a fiscal consolidation of 2 percentage points of GDP between 2019 and 2022. In the document delivered yesterday, and considering the same period, the budget balance improves 0.9 percentage points, which gives an average of 0 , 6 consolidation points less per year.

But for the next few years, the Government is counting on two factors that weigh on the accounts, but which were not previously estimated: the slowdown in economic growth and new injections of capital in the New Bank, which, in addition to the 400 million already forecast for Exceed EUR 2 billion by 2021.

Finance is also less optimistic in reducing public debt. In the previous document, they estimated a reduction of 16.4 percentage points between 2019 and 2022; in the document presented yesterday the cut is 14.9 points. This reduction adds up to minus 4.1 points foreseen for 2023 and puts public debt below 100% of GDP for the first time since 2010. In addition, the Government ensures that it complies with the European rule of public debt reduction. is subject, from 1/20 year (against the 60% reference value).