June 28 (Bloomberg) -- Portugal’s budget deficit widened to 7.1 percent of gross domestic product in the 12 months through March as spending rose after the government carried out a 700 million-euro ($915 million) capital injection into a bank.
That compares with a deficit of 6.4 percent in the calendar year of 2012 and 4.5 percent in the 12 months through March 2012, the Lisbon-based National Statistics Institute said today in an e-mailed statement. The budget deficit was 10.6 percent in the three months through March, wider than a deficit of 7.9 percent in the first quarter of 2012.
“The result of the first quarter is influenced by the impact of the reclassification of the recapitalization of credit institutions with shares amounting to 700 million euros,” Luis Morais Sarmento, the secretary of state for the budget, told reporters in Lisbon today. This capital injection “is not relevant” for the budget limits set in Portugal’s financial aid plan, he said.
The Portuguese Finance Ministry said on Jan. 25 it completed an injection of capital into lender Banif SA.
On March 15, the government announced less ambitious targets for narrowing its budget deficit as it forecast the economy will shrink twice as much as previously estimated this year. It targets a deficit of 5.5 percent of GDP in 2013, 4 percent in 2014 and below the European Union’s 3 percent limit in 2015, when it aims for a 2.5 percent gap. Portugal forecasts debt will peak at 123.7 percent of GDP in 2014.
Data on budget execution through May confirms the “viability” of the budget limits set for 2013, Finance Minister Vitor Gaspar said on June 25.
Economic growth has averaged less than 1 percent a year for the past decade, placing Portugal among Europe’s weakest performers. The government projects GDP will contract 2.3 percent this year before growing 0.6 percent next year. The jobless rate will climb to 18.2 percent in 2013 and 18.5 percent in 2014.
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