CFP examines economic and fiscal developments until June

The CFP Report released today Economic and fiscal developments until the end of the 1st semester 2015 examines the changes in the international and Portuguese economies, as well as fiscal developments in the general government sector in the first half of 2015.

In the first six months, the budget deficit stabilised compared to the same period the previous year (4.7% of GDP in adjusted terms), while the adjusted primary balance went from a 117 M€ surplus to a 24 M€ deficit. This stabilisation was due to the contribution from the social security funds subsector which increased its surplus by 0.3 p.p. of GDP. To comply with the target set for 2015, the deficit will have to record in the second half of the year a higher correction than that observed up to June.

Up to June the general government adjusted revenue recorded a year-on-year development below the MF annual forecast (2.9% and 4.3% respectively). This development was driven by tax revenue (up by 4.2%) and social security contributions (up by 4.9%), although the former grew below the forecast (5%). Therefore tax revenue will have to perform more favourably in the next two quarters so as to achieve the 2015 State Budget (SB/2015) forecasted figure; this seems a likely event if the economy follows the trend seen in the first six months.

In the first half of the year, general government adjusted expenditure grew by 2.8%, a figure above the forecast for the year (2.6%). That performance is explained by primary expenditure, as interest charges fell rather than grew as per the annual forecast. By contrast, spending on social transfers should fall short of the SB/2015 forecast, if the favourable trend in unemployment benefits and pensions paid by social security continues.

In the first half of the year the public debt ratio (Maastricht definition) fell to 128.7% of GDP, which reflects a 1.6 p.p. of GDP improvement compared to the 1st quarter (130.4% of GDP). This decrease was due to a favourable stock-flow adjustment, namely the use of deposits and the purchase of public debt by the social security funds subsector (which reduces the Maastricht debt since this is a consolidated gross debt concept).

Date of last update: 06/10/2015