Portuguese budget deficit shrinks 58% in 2022 amid strong revenue


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LISBON — Portugal’s state budget deficit shrank 58% to 3.59 billion euros in 2022, thanks to a sharp rise in tax revenues due to robust economic growth amid high inflation, the government said.

Finance Minister Fernando Medina told Reuters in November that the economy was expected to grow at least 6.7% in 2022, buoyed by domestic demand and tourism, after growing 4.9% the previous year as it recovered from a pandemic-induced recession.

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The finance ministry said in a statement late on Friday that the improvement in the budget deficit was “justified by the dynamism of the labor market and the economy and by the effect of inflation.”

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It said that tax revenues increased by around 14% to 25.9 billion euros last year, boosted by a 19% increase in value added tax revenues to more than 21 billion euros.

As VAT is a tax on the final price of products and services, its revenues automatically increase whenever there is inflation.

Portuguese consumer prices rose 9.9% year on year in November, just off a three-decade high of 10.1% in the previous month.

The finance ministry said total public revenue grew by 11% to more than 102 billion euros, while public spending increased by just 5.1% to 105.7 billion euros.

Prime Minister Antonio Costa last month said that the public deficit could be below 1.5% of GDP in 2022, compared to the previous official forecast of 1.9% and 2021’s fiscal gap of 2.9%. (Reporting by Sergio Goncalves; Editing by Alison Williams)


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