Council of Public Finance warns: “OE presents significant risks” (act.) – Official Business – Portugal

The proposed state budget is being debated in Parliament presents “significant risks” on several fronts, not the Council of Public Finance (CFP). Government accounts bet in an uncertain recovery especially in the current context of economic slowdown, rely on indirect tax revenue that depends on consumption decided by families, not detail how the anticipated savings will be guaranteed, warns the agency led by Teodora Cardoso in his analysis the proposed state budget, published on Tuesday, March 1.

“With regard to the budgetary forecasts, the risks arise in the first place, the very macroeconomic scenario, particularly relevant to substantiate tax revenue forecasts “, reads the note sent to the press by the CFP, which states that” revenue forecasts to 2016 are still based on an estimate for 2015, and may be affected by the “carry-over” of an observed slowdown in the last quarter of this year. “

the team led by Teodora Cardoso notes that the Executive has an increase of public revenues of 2,597 million euros, of which only EUR 378 million are the result of economic policy measures entered by the Government in the Budget. The rest comes via improvement of the economy

In addition, warn experts, the Government may not have taken into account the fact that the increase in indirect taxes can dictate consumption breaks:. “In the case of indirect taxes It does not seem to be taken into account the likely reaction of economic agents to reduce the quantity demanded of goods on which focus significant increases in taxation, such as the Tobacco tax and Vehicle tax “.

the analysis of the expenditure does not compensate for the apprehension caused by the revenue forecasts and growth. In the Budget, the Government provides significant increases in public spending – with employee salary increases, pensions and other social benefits – which promises to make savings with “other items of current expenditure and a fall in capital expenditure.” The problem, warns the CFP, is that the budget report “are not sufficiently specified measures to ensure this development.” Furthermore, the evolution of forecasts of social expenditure forecast increases “very low”, which “do not seem in line with measures that could explain this contention,” reads the note sent to the press.

report, the team of fiscal experts adds that “the variations presented in some expenditure aggregates raise doubts as to its reasonableness (…). in this context it is noted the forecast of staff expenditure, intermediate consumption and social benefits.”

Lack structural consolidation

in analyzing the document, published two days before the visit of Teodora Cardoso to Parliament under parliamentary consideration of the budget, the Council of public Finance points out that reducing the budget deficit expected (about 3% of GDP without Banif effect in 2015 to 2.2% in 2016) is primarily explained by the improvement in economic activity and its impact on revenues and public spending .

In the CFP accounts, in structural terms, ie discounting the effect of the economic cycle and one-off measures, the budget deficit will be reduced from 2% to 1.9%, only 0, 1 points, which falls short of the 0.5 points recommended by European rules.

it is “minimal structural contribution,” said the oversight body of the accounts in the statement sent to the press, where it adds that, therefore, “the approach of the deficit to the Medium-Term Objective [which is a deficit in structural terms of 0.5% of GDP] remains insufficient to resume the process of consolidation of public finances, already stopped in 2015″ when the structural balance until worsened by about 0.3 points.

The CFP also said that the planned reduction of the public debt of 130.2% in 2014 to 127.7% in 2016 results, largely nominal growth forecast of the economy – that is growth real and price variations – considering that this expectation is also “subject to risks not inconsiderable”

Warning Beware of investments of municipalities and regions in addition to optimism on growth and expected revenue and count on spending generic savings the budget may prove even ventured into the forecast public investment in the regions and municipalities. Is that to promote the implementation of EU funds, the government is considering releasing subnational administrations of debt containment rules to which they are subject. And if so, the risks to the overall public debt, are relevant, not the Council.

The expected increase in public investment in the autonomous regions and municipalities entails risks that “it must be observed,” reads the same sent note the press, which highlights “the intention to exempt the debt rule of subnational governments to contract loans to finance projects with EU funding, a move that could enhance financial imbalance risks of individual governments.”

(updated News at 16:00 with more data)