Even with five months ahead of budget execution, the path of the general government deficit by the end of the year is now dependent on the capacity for growth in tax revenue – which slowed in July but remains higher than expected – and the evolution of spending in the final stretch of the year, after the reset wage cuts was José Sócrates.
The execution data from January to July, published on Monday by the Directorate-General of Budget (DGO), show a deterioration in the deficit of the general government (central government, social security and regional and local government) in relation to first seven months of last year, with the fiscal balance to achieve negative 5.8234 billion euros, 389 million euros more than in the same period.
The increased deficit measured in accounting public (with a different methodology of estimation of national accounts communicated to Brussels) is due to a dual effect. both fiscal revenue slowed in July as government spending increased again
The increase in spending State personnel already reflected in budget execution June and has two reasons for it. One has to do with the comparison of the data (because this year the holiday pay of state workers have been paid in 2013 and only in November did was indicted 14 months); the other is a temporary reason that arises from the replacement of wages in the public sector, after the Constitutional Court (TC) have plumbed in May the progressive wage reductions of 2.5% to 12% from 675 euros gross per month.
According to figures from DGO, personnel expenses increased 9.3%, to EUR 7.6273 billion, while in the same period last year the amount was at 6.9806 billion. The difference of EUR 646.7 million had an immediate impact on the consolidated central government expenditure, which increased by 5.8% to EUR 35.5078 billion.
If this increase contributes to the assumed spending by the State with immediate replacement of wages decreed by the Constitutional Court, there are other factors that also influence this variation. According to the DGO, the increase is also due to the “lag in the payment of the 14th month to the beneficiaries of the pension scheme administered by the CGA (CGA)”, the “consistent increase in the number of pensioners, with impact on transfers “and” Interest expense and other direct debt burden of the state. “
In the case of the increase of personnel expenses, this is a temporary effect, which will partially mitigate the coming months, so take effect the replacement of pay cuts of 3.5% to 10% above 1500 euros, which are voted on in Parliament next week.
As for tax revenue, which has been being supported by growth Capture taxes on IRS, the pace of growth slowed. If by June tax income was increasing 4.3% in the month following the increase did not exceed 3.8%. Still, the state has raised via taxes of EUR 19.8986 billion, more than 735.1 million in the first seven months of 2013 this amount achieved the most, 357.3 million are due to the IRS, which maintains the levels of 2013, the year in which the Portuguese felt in the pocket “huge increase” taxes played by former Finance Minister Vitor Gaspar.
The IRS collection also slowed. When moving from a growth of 8.4% to 6.1%, the amount collected was € 6.1868 billion. Already IRC revenue (2.7308 billion) accentuated the fall (to 9.2%). And coupled with the slowdown of the IRS, returned to penalize the path of direct taxes, which grew by 2.8% in July, just a month before, were growing more than 5%. Nevertheless, the trend is more positive than that provided by the Government, which indicates a decline over the year.
Among the indirect taxes, which more clearly reflect the progress of economic activity, growth revenue accelerated to 4.8%. VAT is that the state will get the largest share and, with this tax, EUR 7.6803 billion, 400 million more than in the period from January to July (an annual increase of 5.5%) were collected.
PSD blame judges
PSD devalued the aggravation of spending to relate it to the decisions of the TC, while the opposition parties to read the data from the budget execution ‘il take them to express “concern” and pointing a “failure” of government policy. The CDS chose not to comment on the figures.
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