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24 January 2014

Portuguese budget below target set last May

Maria Luis Albuquerque from the Finance Ministry said the deficit in 2013 would be around 5 per cent of GDP, approximately €1,750 million below the limit agreed with the Troika.

Net tax revenue rose 13.1% more than the 8.9% increase projected in the budget.

The result rewards the efforts made by the Portuguese people to put the country's public finances on a sustainable path, supports the ongoing economic recovery and makes it easier to achieve the 4% deficit target in 2014. "The results of 2013 make us look up to 2014 with increased optimism and reinforce our determination to stay the path that is taking us to a sound and sustainable economic recovery", said Prime Minister Pedro Passos Coelho.

Portugal has been regularly outperforming the euro area in the turnaround that started in the second quarter of 2013 and has allowed for higher employment creation than was initially hoped for.  In the third quarter of last year the country recorded the largest rise in the employment rate of all OECD countries: up 0.7 percentage point to 61.3%, followed by Ireland, which was up 0.6 percentage point to 60.7% (Employment situation, third quarter 2013, OECD).

As a result, unemployment has been falling faster to 15.5% in November 2013 from 17.0% in November 2012. This means the result for 2013 as a whole is likely to be better than forecast and that the prediction of 17.7% for 2014 can be revised sharply down.

Other recent good news includes the fall in the public debt to 128.7% of GDP in the 3rd quarter of 2013 against 131.3% in the previous quarter, the biggest decrease in the EU, according to Eurostat's latest quarterly release on debt (Government debt at the end of third quarter 2013). Economic sentiment indicators are also at their highest since Portugal requested external assistance. 

Portugal last year reached a positive current-account balance for the first time in two decades, thanks to the excellent performance of exports, which now account for around 40% of the country's GDP, against less than 30% in the pre-crisis period. This year, Portugal is also set to achieve its first primary general government surplus since 1997.

The good results from budgetary consolidation and structural reforms have set the costs of financing the government and, progressively, the economy as a whole, on a descending path, which has accelerated in the last months. The 10-year bond yield dropped to below 5% from around 7%, before the request for external assistance. Continued adherence to fiscal responsibility and increased competitiveness will produce a virtuous circle of more investment, both public and private, and of jobs that are durable and better paid.   

Press release

See also: Portugal: policies, achievements and challenges

© Portuguese Republic Government

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