Portugal says it will meet 2015 deficit target

Portugal will cut its budget deficit to below the EU's 3 percent of GDP threshold next year, its finance minister said on Tuesday, dismissing a higher forecast by the European Commission.

In its autumn estimates for European Union countries, the EU executive forecast Portugal's deficit at 3.3 per cent of gross domestic product in 2015, with the higher figure "mainly due to more cautious assumptions about revenue collection next year".

But finance minister Maria Luis Albuquerque told reporters the government's revenue assessment was "absolutely realistic" and that economic growth meant income could even exceed projections. That will ensure the 2.7 per cent deficit targeted in next year's draft budget will be maintained, she said.

"Portugal will leave the excessive deficits behind in 2015," Ms Albuquerque added. Any deficit above 3 per cent of GDP is considered excessive by the EU, with countries breaking the rule subject to additional financial scrutiny by Brussels.

The commission has until the end of this month to evaluate the draft budget presented by Portugal, which aims to cut the deficit from this year’s projected 4.8 per cent but also ease austerity imposed under its now-completed bailout programme.

Ms Albuquerque said the commission’s estimates did not take into account the impact of moves to curb tax evasion, which have allowed the government to project a lower deficit next year.

“Our confidence in the efficiency of measures against tax evasion are supported by what we’ve actually achieved in 2013 and 2014,” she added.

In a speech on Monday night, hours before the commission published its projections, prime minister Pedro Passos Coelho said Portugal's removal from the list of European countries with excessive deficits next year was a "matter of honour".

“Despite all the prophecies and predictions that may appear and throw doubt upon this matter, I guarantee that the government will not fail in adopting a strategy that will allow Portugal to leave excessive deficits behind in 2015,” he said.

Portugal and its European Union and International Monetary Fund creditors are due to conclude on Tuesday their first round of consultations since the country exited its three-year, €78 billion bailout programme in May. Ms Albuquerque said the sides had discussed concerns about the deficit projections.

On Tuesday, the commission also said it saw Portugal’s economy growing 1.3 per cent next year, slightly less than the government’s 1.5 per cent forecast, after returning to growth in 2014 following a three-year-long recession.

Reuters