Portugal celebrates historic budget deficit, tax revenue figures

LISBON, March 26 (Xinhua) -- Portugal's budget deficit fell to 0.5 percent of GDP in 2018, its best result since the country's return to democracy in 1974, the National Statistics Institute (INE) revealed on Tuesday.

The INE reported a public administration deficit of 913 million euros (1,029 U.S. dollars) for 2018, a major improvement on 2017's figure of 5.77 billion euros.

Government forecasts had been revised down several times, from 1.1 percent in the 2018 State Budget of Q4 2017, to 0.7 percent in the Stability Program presented to the European Union in April 2018.

In February this year, Mario Centeno, Portugal's finance minister, said he was expecting 0.6 percent.

Not only did the actual figure of 0.5 percent beat even that, but the INE told ECO, an online economics magazine, that it might be revised lower still. There are good indications that the final reading, due for release in September 2019, may see the figure nudge down to 0.4 percent.

By way of comparison, the 2017 budget deficit came in at 3 percent. That figure was skewered by the near 4 billion euro recapitalization of Caixa Geral de Depositos bank. Without the recapitalization, the score would have been 0.9 percent.

But the 2018 figure likewise included over 1 billion euros worth of cash injections, to Novo Banco, the legacy bank of the failed Banco Espirito Santo (BES), and to the BES investor credit recovery fund.

According to the INE, "the improved balance in 2018 was principally determined by an increase to current account revenues, especially to tax receipt and social security contributions, a reflection of developments in economic activity and employment."

Indeed the INE also announced on Tuesday that tax revenues in 2018 accounted for 35.4 percent of GDP, a highest level since 1995.

Portugal's prime minister, Antonio Costa, called the day's data "historic and honorable." In comments reported by Portuguese Lusa News Agency, he said "this is not the result of spending cuts or raised taxes, but of economic growth."

Centeno agreed, saying the positive results "didn't require a miracle" but were the product of economic policy. "Portugal has won in its bid for credibility," he said.

The INE and the government expect the deficit to come in at 0.2 percent in 2019.