In 2017, Portugal presented a government deficit of 3% of the GDP mostly due to the demand from Brussels regulators to take into account the cost of the recapitalization of the country’s bank Caixa Geral de Depósitos (CGD). If this extra transaction hadn’t been added to the report, the government budget deficit would have reached a much lower percentage in 2017: 1% of GDP.
Accordingly to the government, there will be a decrease of deficit to 0,7% of GDP, but the Economist’s Intelligence Unit (EIU) is far more pessimistic, expecting the deficit do decrease this year to 1% of GDP instead.
Also, the EIU expects the deficit to keep worsening. The spendings shall progressively reduce, alongside which there will be a relaxation of the revenue growth rate, accompanying the expectation that the country will witness a shift towards a more moderate economic growth.
“During the first two years, the gap [between the government’s predictions and the EIU’s prospects] is significantly low. But towards the end of the observed period, the difference is much more noticeable, as the government is expecting a budgetary surplus, whereas EIU is still predicting a deficit” the analyst explained to ECO.
“Even though the deficit prediction from EIU is low, the unit considered that in a country like Portugal, in the long run, it will become unbearable to have a budgetary surplus, as that would also mean there would be a 4% GDP surplus” she justified.