It is expected that the Portuguese public accounts will show a new budget surplus at the end of this year, close to and less than 1% of gross domestic product (GDP), but the governor of the Bank of Portugal (BdP) emphasizes that what there is “caution” necessary, that is, after the Prime Minister, António Costa, had already said on television (CNN/TVI) that he will produce a surplus this year.
Despite this historic figure (the second annual surplus in the history of democracy, after 0.1% in 2019, and the highest in this period), Mário Centeno, the governor of the BdP, insisted on Monday, less than 24 hours after the delivery of the new state budget proposal for 2024 (OE 2024), that the government must exercise complete prudence in the management of public finances this year and in the coming years, as debt levels must continue to fall sharply. Or for a long time, if we want.
At the opening of the 33rd Lisbon meeting between Portuguese-speaking central banks last Monday in Lisbon, BdP Governor Mário Centeno said that “it is important that fiscal policy is guided by prudence and focuses on supporting the most vulnerable. .”
‘Caution’ in this case means that the country should avoid increasing permanent and structural expenditure and try to achieve successive surpluses in the coming years so that the debt burden, which today is still above 100% of GDP, falls to the 60% who support the Stability Pact, as quickly as possible.
“Sustainable debt reduction is one of the greatest assets we can leave to future generations and is one of the greatest global challenges today,” he added.
“As always, inflation helps put the debt problem into perspective, but without sustained policies to reduce debt, this beneficial effect of inflation quickly disappears or even reverses with the increase in debt service due to higher interest rates and the contraction of the economy which embodies this rise. “.
For Centeno, who last week called for “moderation” in the application of the income agreement, especially regarding salary increases, “the belief is that this understanding must be shared [necessidade de reduzir a dívida, agora com inflação muito mais alta e taxas de juro muito mais elevadas] justifies my optimism about the resilience of the Portuguese economy (and indeed of all our economies) to face new difficulties,” the former Finance Minister reiterated to the audience made up of other central bankers from Portuguese-speaking countries.
Centeno reiterated that rates will not fall anytime soon because “inflation is still above benchmarks at the end of 2023.” “In this context, monetary policy, especially in the eurozone, should continue to serve price stability, in the knowledge that the costs of inflation will be more uneven and regressive than the measures used to combat it.”
This is why “caution is essential to avoid overreacting and not allowing time for the transfer process.”
According to Centeno, “an overreaction could result in an unnecessary economic slowdown and increase risks in the financial system. This is a difficult but crucial balance.”
The macroeconomic and budgetary scenario of the new OE
From the new proposal for the state budget for 2024, in terms of the macroeconomic and budgetary scenario, it is already known that “economic growth for 2024 will be below the 2% forecast in April (in the stability program), according to the data provided to parties on Friday,” cited that day by Lusa.
“According to IL delegate João Cotrim Figueiredo, economic growth should be between 2.1% and 2.2% this year (above the expected 1.8%), but in 2024 it will be around 1.5%.”
As for the budget balance, “the government now forecasts a surplus this year, below 1%, and neutral in 2024, the Liberal lawmaker said,” the news agency said.
“PAN delegate Inês Sousa Real also said that inflation should be around 4.6% this year (compared to the forecast of 5.1%).”
Furthermore, as requested by Centeno, the government emphasizes the need to reduce public debt, aiming to remove Portugal from the group of the most indebted European countries in Europe.
“The public debt-to-GDP ratio is forecast to fall from 112.4% in 2022 to 106.1% this year, according to data sent to Brussels at the end of September under the excessive deficit procedure, with the value below the 107.5% forecast in the Stability Program – pointing to a further decline to 103% of GDP in 2024.”
According to Lusa, “contrary to what has happened in recent years, this state budget will not have any fascinations, the Minister of Finance has already announced”.
“Captivations are a budget management tool that has allowed the Ministry of Finance to retain (and subject to prior approval) part of the budget allocations of organizations and other ministries. In 2023 its value was 1,242 million euros.”
This cost deduction (provided for in the approved OE, but not released by Finance) mainly concerns expenditure on consumables and administrative matters, but is unlikely to be applicable to expenditure on schools (academic part) and health care (clinical and direct hospital).
Luís Reis Ribeiro is a journalist for Dinheiro Vivo
Source: DN
