Portugal’s GDP deficit set to grow slightly

AFTER YEARS of prudent financial management by the government, the Portuguese Finance Minister looks set to try to spend the country’s way out of the recession.

The government has given public sector employees a 2.9 per cent across-the-board pay rise while upping the national minimum wage from 385 euros now to 500 euros by 2011.

According to a report published by the Budgetary Aid Technical Unit, Unidade Técnica de Apoio Orçamental, total public expenditure in 2009 compared to 2008 will rise by 6.7 per cent or 1.7 percentage points up after adjustments for receipts and expenditure have been taken into account.

This means a reduction in the country’s overall GDP to the tune of 2.9 billion euros meaning an estimated deficit climbing from 2.2 to 2.3 percent of the country’s GDP.

The authors of the report, having studied the State Budget for 2009, complain at a lack of “transparency” and “complicated and insufficient calculations” by the government in showing how figures were arrived at.

The report led to the Parliamentary Finances and Budget Commission to demand a detailed breakdown of the nation’s finances from the Minister of Finances, Fernando Teixeira dos Santos on October 16, but has yet to receive an answer.

On the expenses side, the report highlights a 14.4 per cent increase in deficit interest rate which bore “no relation to the expected development of market interest rates” especially taking into account the fact that the lions share of public debt is subject to “a fixed interest rate”.

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