LISBON: Portugal interrupted the process of budget consolidation last year, the Bank of Portugal said on Wednesday, warning that the country's European commitments mean the economic adjustment has to continue to reduce imbalances.
In its quarterly economic bulletin, the central bank said that "in terms of budget policy the consolidation that started in 2011 was interrupted as a result of a 0.8 percentage point fall in structural revenues" even though structural spending dropped to its lowest level since 2003.
It said Portugal's euro zone membership produced favourable monetary conditions thanks to record low interest rates, but it also "poses important challenges at a phase of reduction of economic imbalances, making the adjustment effort fall on the real economy."
The government has promised to Brussels that it will halve the budget deficit this year to 2.2 percent of GDP, but the European Commission has estimated the deficit would likely be higher, at 2.7 percent, while the structural gap should increase slightly.
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