Portugal aims to balance budget after pandemic to keep credibility

Portugal will resume its efforts to have a balanced budget after the COVID-19 pandemic is overcome to maintain its external credibility, Claudia Joaquim, the secretary of state for budget at the finance ministry, said on Thursday. After an economic and debt crisis in 2011, when investors dumped Portuguese assets over concerns about its high deficit and debt and forced the country to resort to an international bailout, Portugal has gradually put its public accounts on a sound footing, winning praise across Europe.

Portugal will resume its efforts to have a balanced budget after the COVID-19 pandemic is overcome to maintain its external credibility, Claudia Joaquim, the secretary of state for budget at the finance ministry, said on Thursday.

After an economic and debt crisis in 2011, when investors dumped Portuguese assets over concerns about its high deficit and debt and forced the country to resort to an international bailout, Portugal has gradually put its public accounts on a sound footing, winning praise across Europe. Last year, it posted its first budget surplus, of 0.1% of gross domestic product, in 45 years of its democratic history. But this year, the deficit has returned with a vengeance due to the pandemic's economic impact and is expected to hit 7.3%.

"Not losing sight of budget balance is of the utmost importance as it contributes to economic and social stability, and to maintaining credibility in the markets," she told a conference. "After the pandemic, the country must be able to re-balance its public accounts." In 2021, the government hopes to cut the gap to 4.3% and then to 2.8% in 2022, Joaquim said, adding that next year's budget will be "one of the most demanding in recent years, requiring permanent adaptations" of government measures.

The government expects the economy to rebound 5.4% in 2021 after an 8.5% slump expected this year - the worst recession in almost a century. The 2021 budget envisages a steep 23% rise in public investment, especially in the national health service and infrastructure, while boosting unemployment subsidies and pensions.

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