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Pandemic Ends Surplus, Leads to 5.4% Deficit in First Half | Public finances

The impact of the pandemic on the public accounts was clearly felt during the second quarter of the year, but despite this, during the first half of the year, the value of the public deficit was below the target set by government for all of 2020.

According to national accounts data released on Wednesday by the National Institute of Statistics (INE), the negative balance of general government was 5.4% in the first six months of this year. This figure confirms the expected deterioration of public accounts compared to last year. In 2019, the balance for the year as a whole was positive at 0.1% (slight downward revision from the surplus of 0.2% initially estimated) and in the first half of the year the deficit had been 1, 2%.

The impacts on public finances of the sudden economic slowdown caused by the pandemic are notorious, with sharp declines in tax revenues and increases in spending related to the health and social support sector. In the second quarter of the year, when the economy collapsed and the effects of the pandemic peaked, the government deficit recorded was 10.5%, compared to a deficit of 2.2% in the same quarter of the year. ‘year. Last year.

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Expectations for the remainder of the year, with an economy recovering but still well below pre-crisis levels, are the maintenance of marked imbalances in public accounts, with tax revenues expected to remain below those of the last year and pandemic-related spending effort are expected to persist.

Regardless, for now, the first half deficit was lower than the executive’s projections for all of 2020. In the supplementary budget proposal presented in June, a deficit target of 6.3 % was defined, taking into account this figure was revised upwards to 7% by the Minister of Finance, after the changes introduced during the discussion of the OE in the Assembly of the Republic.

In general, as was the case last year, the value of the budgetary balance recorded at the end of the year is better than that observed in the first half of the year. In 2020, the factors of uncertainty are much greater, but if that happens again in 2020, the executive will comfortably exceed its target.

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