Implementing decision 2014/197 - 2014/197/EU: Council Implementing Decision of 18 February 2014 amending Implementing Decision 2011/344/EU on granting Union financial assistance to Portugal - Main contents

EN

Official Journal of the European Union

L 107/61

The Council granted financial assistance to Portugal, at the latter's request, on 17 May 2011 by means of Implementing Decision 2011/344/EU (2). That financial assistance was granted in support of a strong economic and financial reform programme (the ‘Programme’) which aims to restore confidence, enable the return of the economy to sustainable growth, and safeguard financial stability in Portugal, the euro area and the Union.

In line with Article 3(10) of Implementing Decision 2011/344/EU, the Commission, together with the International Monetary Fund (IMF) and in liaison with the European Central Bank (ECB), conducted, between 4 December and 16 December 2013, the tenth review of the Portuguese authorities' progress on the implementation of the agreed measures under the Programme.

Quarterly real gross domestic product (GDP) growth continued at positive rates in the third quarter of 2013 and the short-term indicators point to the projected economic recovery. On an annual basis, real GDP is still forecast to decline by 1,6 % in 2013 but to move into positive territory in 2014 and 2015, with growth of 0,8 % and 1,5 %, respectively. The labour market outlook has improved as well but unemployment remains high, expected to peak at 16,8 % in 2014 and to progressively decrease thereafter. Downside risks to the macroeconomic outlook remain, as the projected recovery crucially hinges on positive trade and financial market developments, which also depend on the broader European outlook.

Up to November 2013 the government cash deficit recorded an improvement of 0,25 % of GDP (net of extraordinary factors) compared with the same period of the preceding year, which resulted from revenue growth outpacing expenditure growth. The acceleration of tax revenue growth reflects the recovery of economic activity in recent months as well as improved efficiency in the tax administration, especially in the fight against fraud. On the expenditure side budget execution is overall in line with the targets of the second supplementary budget.

The general government deficit target of 5,5 % of GDP (net of bank recapitalisations) in 2013 is likely to be met and the deficit outcome may even be below the target. This results from positive risks having materialised in the last months of the year while most negative risks dissipated. In particular, tax collection is expected to exceed the implicit targets in the second supplementary budget. Moreover, the yield of the one-off debt regularisation scheme for outstanding tax and social security contributions launched at the end of 2013 was about 0,3 % of GDP higher than envisaged. The absorption of Union Funds is also expected to be better than previously estimated. Furthermore, negative risks from the public-private partnerships' (PPPs) renegotiations have been mitigated. Some negative risks nevertheless persist, notably lower-than-projected revenue from property taxes while overruns on specific expenditure items, particularly personnel costs, intermediate consumption and pensions benefits cannot be excluded.

The 2014 State Budget and other supporting legislation are consistent with a deficit target of 4 % of GDP in 2014. In order to reach the target...