The deficit target this year was revised from 4% to 4.8%, but the government ensures that everything is going according to plan: the cause for the slippage is only in extraordinary expenses that troika does not think so it will not be necessary to implement further austerity measures.
The new figures for the estimated deficit in 2014 is presented by the Government and are included in the report on the excessive deficit procedure of the National Statistics Institute (INE) sent this Tuesday to Brussels.
Looking at the value of the deficit as a percentage of Gross Domestic Product (GDP), the increase in the deficit is all justified by capital injections in the Carris and STCP and forgiveness of a loan in connection with the sale of BPN Crédito. These operations contribute to an increase of 0.78 percentage points of GDP (€ 1289 million) to 4.8%, according to the report published.
For the rest, the government did not change the estimate. And that is what matters to the troika, said on Tuesday at a press conference the Secretary of State for the Budget. “They are extraordinary nature of operations and are not counted as part of the compliance assessment of the adjustment program” said Helder Reis. That is, the European Commission and other entities troika will not take account of these extraordinary expenses when they are to supervise the conduct of fiscal policy in Portugal.
So, said the government official, “our plan more steps are necessary”, or to correct the nominal deficit now forecast at 4.8%, or to correct a deficit even higher that may arise because of other extraordinary operations.
When was presented the amending budget, the minister herself has put the possibility of having to add to the deficit of 4% predicted 5 more 9 percentage points, for a number of extraordinary expenses that the Executive would have to answer. This calculation were included in addition to the 0.8 points now planned because of Carris, STCP and BPN Crédito also the capital injection that the resolution fund did in the New Bank eao financial restructuring process in CP.
There were even included eventual impacts of capital injection made by the Resolution Fund in the New Bank – and that can amount to a value of up to EUR 4900 million (2.8% of GDP) – because the statistics authorities “have not yet decided “what model of accounting operation, said Secretary of State. The impact may end up not exist, only be partial or be felt in its entirety, took over.
Regarding capital injection in CP, which could contribute to an increased deficit of over 2.2 percentage points the methodological changes now announced by INE eventually avoid this outcome. This is because the CP is now included in the universe of Public Administrations. It is true that their operating losses begin to tell the public deficit and its debt also account for public debt, but the injections as held this year cease to be registered because it is a transaction between two entities belonging to the Public Administration.
Thus, the maximum that the deficit could reach (assuming the government controls the evolution of the rest of the expenditure and revenue) is now not nearly 10%, but about 7.6%.
In a press conference, Secretary of State further explained that, according to Government estimates, the methodological changes brought about by the introduction of new rules in the European System of Accounts eventually have a very small impact on both the deficit and the debt.
The reclassification of various entities in the universe of Public Administrations will mean an increase of 0.1 percentage points in the deficit in 2014 Another negative impact, also 0 1 points, arises from the fact that if they fail to record the interest of operations with swaps . The failure to consider the transfer of the fund health CTT (extraordinary income provided for in OE) also causes a worsening of 0.1 points in the deficit.
On the other hand, changes in the rules for the registration of transfers pension funds cause a reduction in the deficit forecast by 0.2 percentage points.