LISBON—Portugal's government Monday approved a strategic budget plan for the next four years, which includes spending limits and, as expected, commits to stringent budget deficit targets for next year.
Finance Minister Vitor Gaspar said there weren't any surprises in the government's forecasts in the document, which must be given to the European Commission on Monday as part of a European Union-wide requirement.
Portugal must show its EU partners that it is committed to fiscal and structural reforms to make its economy more competitive.
The Portuguese government has committed to cutting the primary spending limit by 3.2% in 2013 and the overall spending by 2.1%. Mr. Gaspar said in a press conference that Portugal should become less reliant on outside funding over the next few years, reaching a structural budget deficit of 0.5% of gross domestic product in both 2015 and 2016.
The economy is expected to contract 3.3% this year; it should start to grow slightly next year and expand about 2.5% by 2016, he said.
For 2013, he said the government has committed to cutting the budget deficit to 3% of gross domestic product, a requirement under its €78 billion (roughly $103 billion) bailout program. In that year, public debt will also reach its peak, expected at 115% of output.
Mr. Gaspar confirmed he doesn't expect additional austerity measures will be needed to meet the country's budget deficit target of 4.5% of GDP this year, adding that Lisbon is on track to meeting—or even surpassing—the conditions of its bailout program, such as with exports that continue to grow at a healthy pace despite the economic difficulties faced by some trading partners, like Spain.
One area of concern is spending on social security, he said, which could grow faster than expected due to rising unemployment. "It is necessary to follow how the social security budget evolves with particular care," he said.
Mr. Gaspar also said he sees growing indications that Portugal will be able to return to the markets in September next year to repay some €10 billion in debt due. The country lost access to market funding when it requested the bailout in April last year.
Yields on Portuguese bonds trading in the secondary market have fallen in recent weeks, with 10-year bond yields trading at 10.36% Monday, down from a high of 17.36% in late January, according to Tradeweb.
"Indications that I have, both from the way yields are performing and also on the kind of interest being signalled by foreign investors, have never been so positive," Mr. Gaspar said.
wsj.com
Finance Minister Vitor Gaspar said there weren't any surprises in the government's forecasts in the document, which must be given to the European Commission on Monday as part of a European Union-wide requirement.
Portugal must show its EU partners that it is committed to fiscal and structural reforms to make its economy more competitive.
The Portuguese government has committed to cutting the primary spending limit by 3.2% in 2013 and the overall spending by 2.1%. Mr. Gaspar said in a press conference that Portugal should become less reliant on outside funding over the next few years, reaching a structural budget deficit of 0.5% of gross domestic product in both 2015 and 2016.
The economy is expected to contract 3.3% this year; it should start to grow slightly next year and expand about 2.5% by 2016, he said.
For 2013, he said the government has committed to cutting the budget deficit to 3% of gross domestic product, a requirement under its €78 billion (roughly $103 billion) bailout program. In that year, public debt will also reach its peak, expected at 115% of output.
Mr. Gaspar confirmed he doesn't expect additional austerity measures will be needed to meet the country's budget deficit target of 4.5% of GDP this year, adding that Lisbon is on track to meeting—or even surpassing—the conditions of its bailout program, such as with exports that continue to grow at a healthy pace despite the economic difficulties faced by some trading partners, like Spain.
One area of concern is spending on social security, he said, which could grow faster than expected due to rising unemployment. "It is necessary to follow how the social security budget evolves with particular care," he said.
Mr. Gaspar also said he sees growing indications that Portugal will be able to return to the markets in September next year to repay some €10 billion in debt due. The country lost access to market funding when it requested the bailout in April last year.
Yields on Portuguese bonds trading in the secondary market have fallen in recent weeks, with 10-year bond yields trading at 10.36% Monday, down from a high of 17.36% in late January, according to Tradeweb.
"Indications that I have, both from the way yields are performing and also on the kind of interest being signalled by foreign investors, have never been so positive," Mr. Gaspar said.
wsj.com
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