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Family Protection Subsystem

The Family Protection Subsystem is a component of the Social Security Citizenship Social Protection System of a universal nature that aims to ensure compensation for certain family burdens and in the field of disability and dependency, through the granting of cash benefits. Examples of benefits under this subsystem are the family allowance for children and young people or the monthly allowance for life, which is intended to compensate for the increased family burden of beneficiaries with disabled children. See the Basic Law on Social Security (Law no. 4/2007, of January 16).


Final consumption

The final consumption is the expenditure incurred by resident institutional units on goods or services, used for the direct satisfaction of individual needs or wants or for the collective needs of members of the community. The final consumption can be obtained as the sum of government consumption (by the General Government) and private consumption (by the households and non-profit institutions serving households). The final consumption expenditure may be incurred either domestically or abroad.


Financial account

The financial account records transactions in financial assets and liabilities that have occurred between residents and non-residents. The financial account presents transactions in net terms: net acquisitions of financial assets correspond to acquisitions of assets net of reductions in assets. The financial account defines, in net terms, the functional categories, sectors, instruments, and maturities used in international financial transactions. It includes direct investment, portfolio investment, financial derivatives (other than reserves), and employee stock options, other investment, and reserve assets. The financial account refers to the amounts that the country invests or raises abroad, such as direct investment in companies, portfolio investment in stocks, bonds and notes, or loans from the International Monetary Fund. In the country's relationship with the outside world, the financial account balance shows whether the country is mobilizing more financing from abroad (negative balance) or whether it is investing more abroad (positive balance).


Financial Accounting

Financial accounting is a component of the accounting system outlined in Article 63 of the Budgetary Framework Law. This accounting subsystem allows for the recording of transactions and other events that affect the financial position, the financial performance, and cash flows of a specific public entity.
Financial accounting is regulated by the Public Accounting Standards related to financial accounting (from standard No. 1 to standard No. 25), as specified in Annex II of the Accounting Standardization System for Public Administration, approved under Decree-Law No. 192/2015, dated September 11th. Given that the Standard No. 1 - Structure and Content of Financial Statements, sets the foundation for presenting general-purpose financial statements (both individual and consolidated). The financial accounting is based on the accrual basis and enables the analysis of financial and economic indicators.


Financial accounts

The financial account reflects changes in financial assets and financial liabilities of a given institutional sector as a result of financial transactions between that sector and other institutional sectors or with the rest of the world. In the specific case of General Government, it allows, notably, to assess the change in public debt. The financial accounts provide information regarding cash and deposits, securities excluding shares, financial derivatives, loans, shares and other equity, technical insurance reserves, and other debits and credits. In Portugal, the production of financial accounts is the responsibility of the Bank of Portugal.


Financial assets

Financial assets represent benefits or a series of future benefits for their holders, which are realized through means of payment. Financial assets comprise means of payment, financial credits and economic assets which, by their nature, are close to financial credits.

 

On the income side, financial assets correspond to credit sale and amortization operations, namely bonds and shares or other forms of participation, as well as those resulting from the reimbursement of granted loans or subsidies. On the expenditure side, they correspond to financial operations either with the acquisition of credit securities, including bonds, shares, quotas and other forms of participation, or with granted concessions and advances or reimbursable subsidies. Still within the scope of the expenditure, the acquisition of financial assets by general government is considered a financial operation with no impact on the budget balance, but with an impact on financing and, therefore, on the public debt, thus constituting one of the categories of the stock-flow adjustment.


Financial Equilibrium Fund

The Financial Equilibrium Fund corresponds to a general grant enshrined in the financial regime of local authorities and inter-municipal entities (“RFALEI”), equivalent to 19.5% of the simple arithmetic mean of the revenue from personal income tax (PIT), corporate income tax (CIT) and value added tax (VAT). It is provided for in Article 25(1) in conjunction with Article 27 of “RFALEI” (Law No. 73/2013 of 3 September). The calculation of the participation of each municipality in the FEF results from the sum of the parts referring to the Municipal Cohesion Fund (FCM) and the Municipal General Fund (FGM).


Financial Statements

Financial statements are a structured representation of the financial position and financial performance of a public entity, providing useful information for decision-making and accountability regarding the resources entrusted to the public entity. General-purpose financial statements offer information about an entity's Assets, Liabilities, Equity, Income, Expenses, Other changes in Equity, and Cash Flows.
Financial statements are outlined in Public Accounting Standard No. 1 - Structure and Content of Financial Statements (FS) of the Accounting Standardization System for Public Administration and include the Balance Sheet, Income Statement, Statement of Cash Flows, Statement of Changes in Equity, and the Annex to the FS (comprising a summary of significant accounting policies and other explanatory notes).


Financing Fund of Parishes

The Parish Financing Fund (FFF) corresponds to a general grant for parishes enshrined in Article 36 of Law No. 73/2013 of 3 September (financial regime for local authorities and intermunicipal entities), equivalent to 2.5% of the simple arithmetic mean of the revenue from personal income tax (PIT), corporate income tax (CIT) and value added tax (VAT).


Financing Source

The source of financing identifies the origin of the financing of public expenditure that is being used by public entities.


Fiscal adjustment

A fiscal adjustment is a process of reduction of the budget deficit of the General Government through the adoption of restrictive discretionary fiscal policy measures. It is usually measured in structural terms as the change in the primary structural balance.


Fiscal compensation (linked to the Municipal Cohesion Fund)

The fiscal compensation (FC) associated with the Municipal Cohesion Fund corresponds to a portion of the calculation of that fund. The FC attributed to each municipality differs from the value of the average capitation of the municipality compared to the national average capitation (CMN) of the sum of municipal tax collections and the municipalities' share of VAT revenue. The capitation calculation includes the resident population plus the average daily overnight stays in hotels and campsites. When the average capitation of the municipality is less than 0.75 times the CMN, the FC assumes a positive value equal to the difference between the two multiplied by the resident population plus the average daily overnight stays in hotels and campsites. In the case where the capitation is, in three consecutive years, higher than 1.25 times the CMN, the FC assumes a negative value equal to 22 per cent. of the difference between the two multiplied by the resident population, plus the average daily overnight stays in hotels and campsites.


Fiscal consolidation


Fiscal consolidation measures

Fiscal consolidation  measures correspond to the set of measures taken by the Government to promote an improvement in the budget balance, namely the increase in revenue and/or the reduction of expenditure.


Fiscal effort

The fiscal effort corresponds to the improvement (or correction) of the structural balance.


Fiscal impulse

The fiscal impulse can be defined as the discretionary change in the budget balance (which does not represent reactions to changes in economic conditions). It is usually measured by the change in the primary structural budget balance. The impulse indicates the short-term fiscal stance: if positive, it is expansive, if negative, it is restrictive.


Fiscal policy

Fiscal policy is generally defined as the use of public expenditure and revenue by governments to influence the economy. Following Richard Musgrave's classification, fiscal policy can have an impact on the allocation of resources in the economy, the redistribution of income and the stabilisation of the economy.

 

Intervention in the allocation of resources occurs either directly or indirectly. Directly, when the state acquires or provides goods and services, either public goods (such as national defence) or to try to address market failures. Indirectly, when the use of the tax system and of subsidies influence positively or negatively the realisation of certain economic activities. Since fiscal policy affects the allocation of resources used in the economy, it is a tool that can be used for macroeconomic stabilisation (in parallel with monetary policy) to keep the economy's output in line with its production potential (see potential GDP).

 

Fiscal policy can also be used for income redistribution purposes, taking into account society's preferences in relation to equity, which involves a trade-off between equity and efficiency, according to some authors.


Fiscal policy stance

The fiscal stance reflects the direction and size of the stimulus provided by fiscal policies to the economy, in addition to the automatic reaction of public finances to the economic cycle.

 

This fiscal policy stance is usually gauged by a combination of indicators relating to the change in the structural primary balance (structural balance excluding interest charges) and the change in the output gap (changes in the economic situation), which reflects the difference between the growth rates of real GDP and potential GDP. If, in a context of economic recovery (positive change in the output gap), there is a positive/negative change in the structural primary balance, we are dealing with a countercyclical restrictive policy / procyclical expansionary policy. If, in a context of a deteriorating economic situation (negative change in the output gap), there is a positive/negative change in the structural primary balance, we are dealing with a Procyclical Restrictive Policy / Countercyclical Expansionary Policy.


Fiscal rule

A fiscal rule is commonly defined as a "permanent constraint on fiscal policy, expressed through a summary indicator of fiscal performance" (Kopits and Symansky, 1998*). It is intended to anchor the expectations of economic agents regarding the stance of fiscal policy, economic stabilization and the sustainability of public finances. They can take on four different types, based on the fiscal indicator they constrain: budget balance, debt, expenditure and revenue.

 

*Fiscal Policy Rules; by George Kopits and Steven A. Symansky; IMF Occasional Paper 162/1998


Fiscal space

Fiscal space is a concept that seeks to determine how much room there is in the State budget to provide resources for a given purpose without jeopardising the sustainability of the State's financial position or the stability of the economy. The term excludes funds whose allocation was decided in previous budgets with an impact on subsequent ones, and includes additional resources generated by economic growth, funding available in addition to current revenues and revenue increases resulting from tax rises.


Fiscal sustainability

According to Article 11 of Law 151/2015, of September 11 (Budgetary Framework Law - LEO), sustainability is understood as the ability to finance all commitments, undertaken or to be undertaken, in compliance with the structural budget balance rule and the public debt limit, as provided for in that law.


Floating public debt

Floating public debt corresponds to public debt contracted to be fully amortized by the end of the budget year in which it was generated, mainly intended for treasury support.


Flow variables

Flow variables are measured over a period of time (examples: GDP, deficit, private consumption, etc.).


Forecasting

Forecasting is the process of projecting the dynamics of certain economic indicators that allow the inference of the general state of the economy. These forecasts can be made at a more aggregate level, for variables such as real GDP, the inflation rate, the unemployment rate or the external balance of the economy, or they can be made at a more disaggregated level, for specific sectors of the economy. Unlike nowcasting, forecasting refers to the projection of the period immediately after the exercise or the following periods, and may have longer projection horizons, generally medium or long-term. They are usually carried out using historical data and different econometric methods.


Foreign demand

Foreign demand measures how the export markets of the domestic economy evolve, on average. It is usually calculated as a weighted average of the dynamics of imports from each of the partner economies by their share in national exports. This measure is commonly used to assess export performance. When exports grow more than external demand, the economy is said to have gained market share.


Funded public debt

Funded public debt is contracted to be fully amortized in a budget year subsequent to the year in which it was generated.


Furlough

This is an extraordinary financial support given to the company, per worker, exclusively for the payment of wages, during periods of temporary reduction of working hours or suspension of work contracts. it was used during the COVI-19 pandemic.