Slowing economic activity and inflation cast a shadow over public finances, warns BPI Research

The slowdown in economic activity in Portugal and other European partners and inflation this year, as well as other stressors (such as keeping financing costs at high levels), are risks that “continue to cast a shadow over public finances.” According to a note from BPI Research on the deficit in public accounts until March, which sparked a controversy between the Ministry of Finance and Fernando Medina.

On Thursday, the Minister of Finance estimated the deficit recorded until the end of the first quarter of this year at about 600 million euros, and accused the previous government of increasing spending after the recent legislative elections.

“The budget situation is much worse than what was announced by the previous government,” Joaquim Miranda Sarmiento said at the end of the Cabinet meeting, saying it was important to add the 300 million euro deficit recorded in the latest budget implementation summary to another 300 million euros resulting from increased debt to suppliers.

For analysts at BPI Research, “it is still too early to draw clearer conclusions about the implementation of the 2024 budget,” and this entity recognizes that “the beginning of the year always brings greater complexity compared to the previous year” and explains this justification in detail: “in light of the different profiles for payment of expenses and/or receiving income In addition, there remains a lack of clarity on the main policy measures that the new government will or will have to implement.

Regarding the deficit in public accounts up to March, BPI Research highlights that “the consolidated balance of public administrations as a whole, from a cash perspective, amounted to around -0.4% of GDP in the first quarter of 2024, compared with and concluded that this behavior is due to An increase in revenues was much smaller than that in expenses (4.3% and 15.1% on an annual basis, respectively).