Is it with "special caution" that the Council of Public Finances (CFP) perspective on the budget execution of the second part of 2016, in particular the last three months of the year, the entity chaired by the economist Teodora Cardoso considers it especially demanding, taking into account the pressures on both the revenue side of public expenditure.
To know: the increase of personnel expenses associated with the replacement phase of the salaries in the civil service and even the replacement of the 35-hour work in the public service (from 1 July), the impact on the revenue of the descent partial VAT recovery (also from July), the "slowdown in the growth of tax revenue", the evolution of the Portuguese economy and the external below that projected by the Government in the budget and the impacts that "may result from situations of fragility to the level of the financial system".
The alerts, that the CFP has been leaving throughout the year, are restated to the days of the presentation of the next budget, in a report published on Tuesday about the evolution of public accounts in the first half of the year, where the alert that the conditions of budget execution have specifics that advise special caution in the comparisons with periods counterparts.
One of the reasons has to do with the fact that there are measures whose impact in the accounts if it makes you feel more at the end of the year, warns the CFP. "If in previous years the second half has registered deficits smaller than the first, the specific circumstances of the year 2016 advise some caution as to the expectation can be observed a similar performance".
in Spite of pointing to various risks, the entity responsible for the oversight of fiscal policy reaffirms "the projection that was published in September" in relation to the public accounts – and there, the CSC predicts that the deficit this year is 2.6%, above the initial target of the Government (by 2.2%) but closer to, although still above the target of 2.5% agreed with the European Commission. Those who are still there are days considered it to be possible to achieve the target of 2.5% was the Bank of Portugal, taking into account the data of the first half.
The analysis of the CFP is made in the national accounts, in the optical that would account for the evaluation of the deficit by Brussels, but is not directly comparable with the data of budget execution that are published every month in public accounting and in respect of which there are already statistics known by the month of August.
the Point of the situation in the middle of the year: the improvement of the revenue contribution and the tax and expenditure reduction put the deficit up to June in 2510 million euros, the equivalent of 2.8% of GDP in the first half, which compares with 4.6% in the first half of 2015. But there are risks that are not dissipated, insists the CFP, pointing out that there are specific factors that "make the exercise of budget execution in the second half of the year (and, in particular, in the last three months) are particularly demanding."
Among these circumstances, the CFP includes "whether the late onset of the entry into force of the law of the OE/2016, whether the changes in discretionary fiscal policy, with an impact both at the level of the recipe (e.g. lowering of the VAT in the catering sector) and the expenditure (e.g. replacement wage and the reduction of the regular working time in public administration for 35 hours)".
The same warning has already been left by the Technical Unit for Budgetary Support (UTAO) in relation to personnel expenditure. This is because, in the first half, this expenditure had a growth higher than the planned for 2016 and that trend, warns the CFP, "should increase in function of the growing impact of the replacement wage’, that is progressive throughout the year (the cut-off is eliminated gradually and in the last three months wages in the public already will not have the cuts).
Being "expected that the pressure on personnel costs further in the second half of the year" (also by the impact of the replacement of the 35 hours of monthly work), the body headed by Teodora Cardoso says that the management of captive budget by the Government this year has a "more important". The alert comes days after the UTAO estimate that the budget of 447 million euros reserved for compensating for a reversal of the cuts to be fully used because of a slippage in the costs of salaries. Another concern of the CFP has to do with the implementation of the policy of recruitment of civil servants, because the Government has committed itself to be only an employment of a worker for every two departures in the public administration, hoping to here a saving of 100 million, but in the first half of 2016 the number of employees has increased (by 0.1% since the beginning of the year).
difficult Recovery in VAT
on The revenue side, the CFP note several deviations in the implementation of some taxes, even though the growth of tax revenue in the general government in the first half of the year (not to be confused with the data of the sub-State referred to by the Directorate-General of the Budget) is higher than expected for the year as a whole (up 3.4% vs. 3.1%).
But in the second quarter there was a slowdown in the revenue from indirect taxes (mainly because of the evolution of the special taxes on consumption, or on fuel, tobacco and alcoholic beverages), at the same time that there was a break in direct taxes (in particular at the IRS, where the surcharge was reduced in function of the levels of income).
The tax revenue it generates to the State, the VAT, slowed in the second quarter, and revenue growth was "less than one-third of that predicted by the Ministry of Finance in the OE/2016 for the whole year". Not only the gross revenue has slowed down, as also the increase of VAT refunds to businesses had an impact on the values of the recipe. And with this, the net revenue between April and June was almost half the figure recorded in the previous three months, note the CFP.
in the middle of The year, the State had only collected 30% of the revenue planned for the whole year and, before this deviation, the recovery is difficult, says the Council. The Government estimates that the partial reduction of the VAT on the restoration, in force since 1 July, will have an impact on the revenue of 175 million euros in the second half of the year. In conjunction with the "behavior less dynamic private consumption," this loss "to accentuate the pressure deviation downstream of this tax compared to the objective laid down", alert the CFP.
Impact of CGD on the debt
in Addition to the risks in the revenue and expenditure in 2016, the CFP alert to other impacts "in the short and in the medium term" in debt and in deficit. The warnings have to do with the financial system: "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 Espírito Santo may have negative impacts on the budget balance and the public debt".
by the way, is in capital expenditure, says the CFP, who is one of the main risk factors for the implementation of the budget, given the possible negative impact of the recapitalisation of CGD and the budgetary impact of the compensation the underwriters of the debt issued by entities of Grupo Espírito Santo (marketed to the branches of BES) may have, by way of the assumption of responsibility on the part of entities classified in the general government".
it is certain, however, that the recapitalization of a public bank go still in 2016. In the interview to the PUBLIC last week, the prime minister admitted this even. When asked if the first phase is already scheduled for this year, António Costa replied: "Not necessarily. We have been working with the administration of the Box. It will be tailored to the needs of the effort of capitalization".