The government admits a higher deficit, but believes in a “robust” economic recovery

Finance Minister João Leão admits that the third wave of the pandemic is having “much stronger” effects than the government expected earlier this year for economic development and admits that the public deficit will be above the state budget in 2021 (OE), but at the same time continues to believe in a resumption of economic activity in the second half of the year and – as he says – at a more intense pace.

Leão can be heard in parliament in the Budget and Finance Committee this Tuesday, where he announced that the government will review the deficit target when it presents the stability program in April.

“The development of the pandemic has led to containment measures that will have a significant impact, especially in the sectors most affected by the need to maintain social distance. This means that in the stability program we have to significantly review the macroeconomic scenario for 2021 and revise the budget deficit upwards for 2021. On the other hand, and in the opposite direction, the successful approval of vaccines gives us confidence in an economic recovery in the second half of the year is even more robust than expected. We are therefore confident that due to this very intense recovery in the second half of the year, 2021 will be a year of economic recovery, ”he said.

In the national budget for 2021, the government expects a deficit of 4.3% of gross domestic product (GDP) and forecasts annual growth of 5.4% (the economy contracted by 7.6% last year). The data released by the Banco de Portugal last week, based on a daily indicator of economic activity, showed that from the closure of schools to the end of January there was a decrease of 7.7% compared to the same period last year.

Hoping that the opposition would remember that Portugal was the third country in the euro area that spent less on combating the crisis in 2020 and less than last year’s budget ceiling, the minister provided data on the execution of a number of points, as in the EU National Health Service, where spending increased by 6.8%, staff costs by 6.1% and investments by 65.4%. And he stressed the fact that the expenditure was above the ceiling foreseen in the supplementary budget (11,369 million compared to the 11,301 million foreseen there).

The PSD and BE accused the executive branch of not executing all public spending, but the minister replied that there are areas of execution that are not dependent on the government (he mentioned the universities’ case), saying that a budget was in the public accounting – the one that Parliament gives the green light to – it represents a maximum approved spending cap, it claimed that a budget must have scope to cope with unforeseen circumstances and that part of the budget is made up of funds that are financed from own income and European funds, if these do not materialize, cannot be carried out.

PSD MP Duarte Pacheco said the government has called for increased spending on supplementary OE. However, he said that “he managed to save € 7 billion compared to what he was asking for”. The minister, wearing a mask, shook his head backwards. And he again challenged identical numbers presented by Left Bloc deputy Mariana Mortágua, who also accused the executive branch of leaving more than 7,000 million to be executed.

João Leão even provided data from city councils that the execution of the spending was several years below forecast (he showed a picture of the Salvaterra de Magos case during the Troika crisis to accuse BE of the inconsistency). Afonso Oliveira, PSD MP, also denied the comparison with the performance of the municipalities, saying that this comparison “also applies to those who do not understand” what a municipality budget is.

Keep the support

Confronted the minister with the implementation of business support measures, CDS MP Cecília Meireles stated that there was € 3,000 million in support in 2020 that did not reach the field. “It is possible not to deceive companies and not to sell them [promessas]? “He asked.

The minister said support for businesses and families will continue as long as the pandemic continues: “We must avoid the risk of withdrawing support for the economy too soon.”

When asked by PCP MP Duarte Alves about the implementation of certain rules and regulations for public investment, João Leão said the government is honoring some of the commitments negotiated with the communist bank, such as supplementing unhealthy, painful and risky workers in some public services.

Concerning the execution of the public expenditure, the Deputy Duarte Pacheco went so far as to confirm that the Minister of Finance, “in view of the needs of the country”, is applying a strategy similar to that of “Dr. Oliveira Salazar” rejected, with João Paulo Correia considering the statement “parliamentary outrage” in relation to the dictatorship in Portugal, based on a comparison with “a dictator, an oppressor”.

Later, João Leão would accuse the PSD of being satisfied with the current crisis, a position Duarte Pacheco would consider “unacceptable” and which would motivate a request for honorary defense. The minister made it clear that when he said it he was referring to the position of the Social Democrats as “the 2021 deficit was worse than expected” in relation to the pre-pandemic budget.