Finance Minister Fernando Medina said today that gross domestic product (GDP) should grow above 6%, reiterating that the economy’s resilience is being verified in a context of “clear bills”.
“GDP increase will exceed our expectations in April and should reach more than 6% this year,” Fernando Medina said at a regimental hearing at the Budget and Financing Committee (COF), in parliament.
In his opening speech to COF delegates, Fernando Medina reiterated the goal of reducing the national debt to values below 120% of GDP and that he will achieve the deficit reduction to 1.9%.
“The accounts remain correct. This is a guarantee of security for the future and which we will not – and cannot – give up,” said the finance minister, who stated in response to PSD deputy Hugo Carneiro that “the Portuguese economy is not growing above the average of the European Union, but growing above each of the countries of the European Union”.
Presenting measures to mitigate the impact of the price hike on household income, the Treasury Secretary said the government is operating at 6.4% GDP growth this year, an upward revision from 4.9% previously. expected.
In the proposal for the National Budget for 2022 (OE2022), which was submitted to parliament in April, the government forecast economic growth of 4.9% this year, a slight downward revision (0.1 percentage point) compared to the presented figure. macroeconomic scenario. Program.
In OE2022, government debt is expected to fall to 120.7% of GDP this year.
Focusing on the family support package approved to mitigate the impact of the price hike, the minister admitted it was questionable whether it could have gone further, stressing that the government has decided to go as far as she understands.
“Can and should we go further? I answer clearly: we will go as far as we can,” he said.
The official also said: “A major budgetary effort is being made to protect the revenues and trade with the margin we can have”.
And he stressed that, “given the magnitude of the clash, there is no government in the world that can cancel the price increases that we have registered”.
During the hearing, several deputies from different opposition parties criticized the scope of the aid measures and the fact that the 2023 update of pensions is not being carried out in accordance with the legal provisions in force.
He pointed to the context of the war in Ukraine and its impact on price increases, stating that this is “a war in which gas and food have been used as weapons and for this reason carries serious costs for the […] population”.
Fernando Medina acknowledged that “essential goods are more expensive”, which anyone can see when visiting the supermarket or a gas station, but noted that the answers “need to strike a balance between easing the weight of inflation in the present and protecting our future”.
The government has not yet made a decision on updating the IAS and civil service increases
The manner in which the Social Support Index (IAS) will be updated in 2023 has not yet been decided, said Finance Minister Fernando Medina, indicating that the matter is under evaluation.
“We are evaluating this decision [atualização do IAS em 2023]the decision will be announced in due course,” said the finance minister, leaving the “guarantee” that the government “has done everything”, and will continue to do so, “to protect the most vulnerable”.
Fernando Medina responded to questions from PSD deputy Hugo Carneiro, who asked him about updating the IAS – an index that serves as a reference for updating various subsidies and social benefits.
Hugo Carneiro also questioned the minister about salary increases for the civil service in 2023, and Fernando Medina replied that this is an issue that has not yet been decided, stressing that when taken, it will be presented “first hand” to the trade unions in the context of the collective bargaining process.
The update of the IAS relies on the average annual growth of Gross Domestic Product (GDP) for the last two years ending in the third quarter of 2021, calculated from the INE quarterly accounts and then combined with the inflation rate.
In years when that average GDP growth rate is equal to or greater than 3% (as it is now), the IAS update corresponds to inflation plus 20% of the real GDP growth rate.
This is also the formula for updating pensions to two IAS, but as the government has already announced, in 2023 and due to the extraordinary context of high inflation, the legal formula for pensions will not be adhered to, so several parties have wondered what the solution with regard to the IAS.
Government refunds all extra VAT income
The finance minister rejected criticism that the government is ‘benefiting’ from the price increases and says it will return all additional VAT revenues through the recently approved aid package.
Finance Minister Fernando Medina said that if the growth rate of VAT revenues is maintained until February, the state will allocate an additional 2.4 billion euros through this tax than foreseen in the state budget for 2022 (OE2022).
The amount, the minister said, is equivalent to the measures foreseen in the anti-inflation plan, targeting families, recently presented by the government, which provides, among other things, for a subsidy of €125 to all non-retired persons with a gross monthly income of up to 2,700 euros, support of 50 euros for all dependents up to the age of 24 and the additional payment of an amount equal to half-pension to all pensioners with a pension of up to approximately 5,300 euros per month.
“We will return any additional VAT revenue we expect to have,” he said, pointing out that the additional revenue gained through other taxes will be used to offset the rise in the cost of inflation in terms of government spending.
“Are there any other tax revenues that amount to around €1 billion?
Novo Banco’s restructuring process should be completed soon
Finance Minister Fernando Medina said he expected Novo Banco’s restructuring process to be completed soon and reiterated that there will be no further injections into the bank under the contingent capital mechanism.
“We hope to have the restructuring process completed quickly” from Novo Banco, said the finance minister, who is heard in the Budget and Finance Committee, in response to questions from liberal initiative deputy Carla Castro.
On the occasion, Fernando Medina also said that “the state will not make bridal injections through the contingent capital mechanism”, as it is defined, and reiterated that, on this front, the “Novo Banco file is closed”, recalling, however that, that, that lawsuit is still pending.
“There are, in fact, disputes over the challenges that Novo Banco has taken on,” and “so far the balance sheet has been very favorable to the Portuguese state,” he said.
Novo Banco was established in August 2014 at the time of the resolution of Banco Espírito Santo (BES), which is held by the Bank Resolution Fund (FdR).
In 2017, after selling 75% of Novo Banco to the US investment fund Lone Star, FdR pledged to cover losses by 2026 on ‘toxic’ assets with which Novo Banco owned BES up to 3,890 million euros.
Since then, FdR’s capital injections into Novo Banco have sparked controversy every year.
In total, Novo Banco has so far used up to EUR 3,405 million in public money under this agreement.
This process has already led to several disputes between Novo Banco and the Resolution Fund over payments, which are still in arbitration, regarding the provision for the end of the operation in Spain, the application of the transitional regime of IFRS9 and the valuation of the participation units in the restructuring funds.
In 2021 Novo Banco made a profit for the first time (184.5 million euros).
It is not the government’s option to make a “brilliant” in the deficit
The finance minister said today that it was the government’s option to repay to families the extra costs they bear with VAT, not channel it to reduce the deficit and make a “brilliant”.
“We have not taken the opportunity to highlight the deficit over the original forecast because, as I said, we will use these additional gains [no IVA]” to mitigate the impact of the price hikes, Finance Minister Fernando Medina said during a hearing in the Budget and Finance Committee.
The official responded to criticisms, signaled by opposition parties, of the additional gains in terms of tax revenues, especially in terms of VAT, which the state has received from the rise in the prices of goods and services.
In this regard, he said the 2022 deficit target – set at 1.9% of GDP in the state budget for 2022 – will be maintained because the government “has taken the political decision to do so”.
Earlier, the minister had already indicated that the additional VAT revenues to be collected this year, assuming that revenues develop in the rest of the year in line with what has been verified so far, will amount to 2,481 million euros. that this is the value of the package of measures recently approved by the government to support household income.
Source: DN
