Portugal’s high debt, budget surplus is an ‘exception’ in EU – Commission advisory body

The European Fiscal Board (EFB), the European Commission's independent advisory body, considers in its annual report that Portugal is an ‘exception’ in the European Union (EU) for having high debt and achieving a structural surplus.

In its annual report for this year, based on final figures for 2023, the EFB notes that "member states with high debt have increased their underlying structural deficits, with the exception of Portugal, which was estimated to have a structural surplus."

"Therefore, also in its final assessment for 2023, the Commission did not emphasise the deterioration of the underlying budgetary positions and the consequent implications for sustainability," says the organisation in the document published on Wednesday in Brussels.

The position comes after Portugal ceased to have macroeconomic imbalances last June, after several years of warnings from the European Commission and the fact that it had even recorded an excessive deficit.

As part of the spring package of the European Semester (the annual European framework for coordinating budgetary policies), the European Commission attributed the change to the "reduction in vulnerabilities related to high private, public and foreign policy debt, which should continue to decrease".

Portugal went from a deficit of 0.3% of GDP in 2022 to a budget surplus of 1.2% in 2023, while public administration debt fell from 112.4% of GDP at the end of 2022 to 99.1% at the end of 2023.

Earlier this month, the government estimated that the economy would grow by 2% in 2025, pointing to budget surpluses of 0.3% in 2024 and 0.2% next year.

This June, the European Commission announced the opening of excessive deficit procedures for seven EU member states: Belgium, France, Italy, Hungary, Malta, Poland, and Slovakia.

This was after the institution had previously identified "12 member states with an expansionary fiscal impulse of primary current expenditure financed at the national level that was deemed not in line with the budgetary recommendations", including spending on non-targeted energy measures, public sector wage increases and higher levels of social and health spending, recalls the report published on Wednesday writes.

But Brussels moved against seven countries because they "failed to take into account the withdrawal of targeted and untargeted energy support measures, which concealed an expansion of underlying spending, particularly in the case of several countries with very high debt,” the EFB added.

"This marked a change in the Commission's assessment methodology compared to autumn 2022 when the withdrawal of targeted energy support constituted a risk of default in the case of Portugal," the European Fiscal Board said in the document.

(Ana Matos Neves – edited by Pedro Sousa Carvalho | Lusa.pt)