LISBON: Portugal will exceed its 4 percent of GDP budget deficit target for this year with the gap likely to reach 4.8 percent, the National Statistics Institute (INE) said on Tuesday in a report that is likely to disappoint the country's bailout creditors.
The institute cited financing of public companies that are now included in the deficit calculation under new European accounting rules, as well as other new accounting rules, behind the change in the estimate.
Portugal exited a bailout assembled by the European Union and IMF in 2011 in May but the government has pledged to maintain its budget consolidation efforts as it still has targets to meet this year and next. Portugal had promised to cut the deficit to 2.5 percent in 2015 from 4 percent this year.
"Regardless of the reasons, the first reading of this number is negative. Investors abroad had 4 percent deficit in mind and 4.8 percent will be received with concern," said Filipe Garcia, head of Informacao de Mercados Financeiros consultants in Porto.
"But it's also true that the European Union is now more open to excessive deficits, due to the situation in France," he said, expecting the government to press for more revenues.
The deficit in the 12 months to the end of June rose to 4.8 percent of GDP from 4.1 percent in March, INE said.
It said the projected deficit included nearly 1.3 billion euros, or 0.74 percentage points of GDP, in financing to public transport companies STCP and Carris.
The figures do not include 3.9 billion euros used by the state to rescue Banco Espirito Santo in August, but the government has said they will not be taken into account when reporting the deficit to Brussels.
Last year, the deficit fell to 4.9 percent of GDP from 5.5 percent in 2012.
On a positive note, however, INE said the country's gross public debt should dipped slightly to 127.8 percent of GDP from 128 percent last year.
Portugal's benchmark 10-year bond yield was practically unchanged at 3.172 percent after the INE release.
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