The Council of Public Finances (CFP) maintains the projection it published in September – a deficit of 2.6% of GDP in 2016, above the target of Brussels.
The institution, led by Teodora Cardoso, reiterates "the assessment of the risks there marked, in good part the result of the specificities of the budgetary year of 2016," reads the report released this Tuesday by the way of fiscal developments until the end of the second quarter of 2016, which reviews the development budget of the government sector in the first six months of the year.
THE CFP considers to be "particularly demanding" the year of budget execution in the second half of the year (and, in particular, in the last three months)". For several reasons: the increase of personnel expenses (in function of the reversal phases of the reductions in remuneration of public workers and the decrease of the weekly schedule of work of workers in public functions from 40 to 35 hours from 1 July), the negative revenue impact of the VAT due to the decrease of the rate of this tax for the catering industry from July, combined with the slowdown in the growth of tax revenue and with an evolution of the national and international economy below those envisaged in the macroeconomic scenario underlying the Budget of the State in 2016.
the financial sector involves risks to the public finances in the short and in the medium term, he adds the institution. In particular, "the recapitalisation of CGD, as well as compensation to the underwriters of the debt issued by entities of Grupo Espírito Santo marketed to the branches of Banco Espirito Santo, could have a negative impact on the budget balance and the public debt".
The budget deficit until the end of the second quarter of 2016, reads the report, it was 2510 million euros (2.8% of GDP in the first half). This value represents an improvement of the budget balance in terms of counterparts (by 1.8 percentage points of GDP or 1542 million euros), either by comparison with the previous quarter (by 0.2 percentage points of GDP).
“However, it is still higher than expected in the OE/2016 for the whole year (by 2.2%), being also higher than the goal of 2.5% of GDP is constant from the Decision of the Council of the European Union, 2 August 2016,” the CFP. The improvement of the balance was based on either an increase in the revenue contribution and taxation (contributing to the increase of 623 million euros of total revenue), a decrease of the expenditure (919 million euros), in particular of the interest burden and, especially, of the capital expenditure, including public investment.
Still according to the document, the growth in (nominal) government revenue slowed in the first half of the year (to 1.7%), being lower than expected for the whole year in the OE/2016 (3% in adjusted terms). “The evolution of tax revenue of 2.The third quarter was the determining factor for this slowdown,” says the institution.
In the second quarter, tax revenue grew 0.5% yoy, when in the first quarter had grown by 6.5%. Nevertheless, in the whole of the first half, the tax revenue grew by 3.4% (above the forecast of 3.1% budgeted for the whole year). The evolution of revenue non-fiscal and non-contributory kept the negative behavior verified in the previous quarter (-5,6% annual variation accumulated in the first half).
expenditure maintained the trend of reduction year-on-year (-1,6%) in the second quarter, although it slowed down compared to the beginning of the year (- 3.0% 1.Nd quarter). The reduction at the end of the semester (-2,3%) continues to contrast with the annual increase as projected by the ministry of Finance (+1.9% in the OE/2016 +1.5% in the Stability Programme/2016). For this evolution contributed all large aggregates of expenditure with the exception of expenditure on personnel.
The ratio of public debt in the perspective of Maastricht reached 131,7% of GDP at the end of June (that compares with 128,9% of GDP at the end of march), taking the stock of debt increased in 6524 million euros, for a total of 239,8 thousand million euros. The debt of the Maastricht net deposits of the central government corresponds to 121.8% of GDP, having increased by 0.2 percentage points of GDP, compared to 1.First quarter of the year and 2.7 percentage points of GDP, compared to the end of 2015.