Portugal Narrowed 2013 Budget Gap to 5% on Higher Tax Revenue

Portugal narrowed its budget deficit last year to about 5 percent of gross domestic product as it raised more tax revenue than planned, Parliamentary Affairs Minister Luis Marques Guedes said.

The government had set a 5.5 percent deficit target for 2013 that didn’t include spending of 700 million euros ($956 million) on a capital injection in lender Banif SA, representing about 0.4 percent of GDP. The 5 percent figure for the 2013 deficit includes the spending on Banif, Marques Guedes said.

The provisional public administration deficit in 2013 was 7.15 billion euros, beating the limit set in Portugal’s European Union-led financial aid program by about 1.75 billion euros, the Finance Ministry said in a statement today. Net tax revenue rose 13.1 percent, more than the 8.9 percent increase projected in the budget. Spending excluding extraordinary operations increased 5.7 percent.

While Portugal emerged from its longest recession in at least 25 years in the second quarter, Prime Minister Pedro Passos Coelho still has to trim spending by 3.2 billion euros in 2014 to meet targets set in the aid plan after relying mostly on tax increases in 2013. Coelho is trying to regain full access to debt markets with the end of Portugal’s 78 billion-euro bailout approaching in the middle of May.

The government targets a budget deficit of 4 percent of GDP for 2014. It forecasts the shortfall will fall below the EU’s 3 percent limit in 2015, when it aims for a 2.5 percent gap. The deficit was 6.4 percent in 2012, according to the country’s statistics institute.

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