Europese Commissie beoordeelt gewijzigd Portugees Stabiliteitsprogramma 2004-2007 (en)

The European Commission today adopted a recommendation to the Council on the updated stability programme of Portugal, which was presented in December 2003 and covers the period from 2004 to 2007. This is in accordance with the Council Regulation on the strengthening of the surveillance of budgetary positions and the surveillance and co-ordination of economic policies. After the economic recession of 2003, the macroeconomic scenario underlying the 2003 update of the Portuguese stability programme projects real GDP growth to accelerate from 1% in 2004 to 2_% on average per year in the period from 2005 to 2007. These are plausible assumptions. According to the available information, a general government deficit below the 3% of GDP reference value of the Treaty may actually be achieved in 2003. However, such an outcome needs to be confirmed by the regular reporting of the deficit and debt figures of March 2004. On that basis, the Commission will carry out an assessment of compliance with the recommendation addressed to Portugal under article 104(7) of the Treaty, which called for bringing the excessive government deficit to an end by 2003 at the latest. According to the programme's projections, the general government deficit is estimated to decline marginally from 2.9% of GDP in 2003 to 2.8% of GDP in 2004. For subsequent years, the programme update projects a gradual reduction in the government deficit, reaching just above 1% of GDP in 2007. In cyclically-adjusted terms, Portugal converges towards a close-to-balance budgetary position by the end of the programme period. The debt-to-GDP ratio is projected to decline by a total of 3 percentage points of GDP between 2004 and 2007, reaching 57% of GDP in 2007. Concerning long-term sustainability, the Portuguese authorities are following the Council recommendation which called for structural reforms particularly in areas with a direct impact on budgetary consolidation. However, further measures in the area of pension reform are necessary to complete the reform process initiated in 2001 and secure the long-term sustainability of age-related expenditure in the face of an ageing population. The Council is expected to adopt a formal opinion on the updated Portuguese stability programme on 9 March 2004.

The Commission recommendation is adopted on the initiative of Pedro Solbes, EU Commissioner for economic and monetary affairs.

The Commission's main conclusions on the updated Portuguese programme are:

• After its retrenchment bottoming out in 2003, domestic demand is expected to recover in the following years, although at a more moderate pace than in the second half of 1990s. Major stimulus to growth should thus be provided by external forces, underpinned by domestic wage moderation. The macroeconomic scenario of the programme assumes annual real GDP growth to accelerate from 1% in 2004 to 2_% on average per year in the period from 2005 to 2007. In this regard, the programme scenario incorporates elements of prudence that could absorb moderate unfavourable shocks, should these occur.

• According to data on budgetary execution for the state sector (on a public accounts basis), a general government deficit slightly below the 3% of GDP reference value of the Treaty may actually be achieved in 2003. The Commission Autumn 2003 forecast had projected a deficit of 2.9% of GDP, including one-off measures amounting to 2% of GDP. A deficit below the 3% reference value needs to be confirmed by the regular reporting of deficit and debt figures of March 2004. On that basis, the Commission will carry out an assessment of compliance with the recommendation addressed to Portugal under article 104(7)⁽¹⁾.

• The government deficit is projected to decline from 2.8% of GDP in 2004 to 2.2% of GDP in 2005, 1.6% in 2006 and 1.1% in 2007. According to Commission calculations based on the projections of the programme, the cyclically-adjusted balance would improve by about 0.4 percentage point on average per year, reaching -0.7% of GDP in 2007.

• The medium-term budgetary consolidation strategy is centred on three axes: (1) an ambitious programme of structural reforms, with a particular incidence in those areas which bear directly on public finance, such as public administration, health-care, and education; (2) a sustained policy of curbing government consumption through wage moderation and a quasi-employment freeze; and (3) a gradual improvement in productivity and competitiveness to be fostered, inter alia, by a substantial cut in the corporate tax rate. In addition, the adoption in 2002 of a Budgetary Framework Law ("Lei de Estabilidade Orçamental") is expected to have reinforced the co-ordination of budgetary policy across all levels of government. As a consequence, the Portuguese authorities project a cumulative decline by 2 percentage points in the government expenditure-to-GDP ratio over the period from 2005 to 2007, partly offset by lower revenue of 0.7 percentage points of GDP.

• The budgetary strategy adopted by the Portuguese authorities, by relying on expenditure restraint rather than on tax increases, is likely to improve the confidence of private economic agents, thereby being conducive to economic growth over the medium-term. However, a number of qualifications and risks need to be stressed, notably the high degree of uncertainty that surrounds the outcome for tax revenue over the projection period, possibly leading to substantial tax shortfalls, together with the risk of social transfers growing by more than planned.

• The budgetary stance of the update is expected to ensure that the Stability and Growth Pact's medium-term objective of a budgetary position of close-to-balance or in surplus is almost achieved at the end of the programme period. The debt ratio is projected to decline by 3 percentage points of GDP to 57% in 2007.

• On the basis of current policies, risks of imbalances in the long term cannot be ruled out. Hence the timely achievement of a budgetary position close to balance is imperative. Failure to do so would imply a rising debt ratio over time once the impact of ageing takes hold. The imminent wave of population ageing heightens the urgency of completing the reform process, above all in the more sensitive age-related expenditure areas, before the current window of opportunity closes.

• Finally, the economic policies as reflected in the 2003 update are broadly consistent with the recommendations of the Broad Economic Policy Guidelines, specifically those with budgetary implications. Although plans for the period from 2004 to 2007 involve an improvement in the cyclically-adjusted balance by only 0.4 percentage point of GDP on average per year, and thus below the 0.5 percentage point benchmark, the composition of the budgetary adjustment follows the recommendation that calls for deficit reduction to be obtained mainly through expenditure restraint. Moreover, the recommendation requesting Portugal to undertake structural reforms in areas with a direct impact on budgetary consolidation is being followed in good time.

The Stability and Growth Pact, adopted by the Amsterdam European Council in June 1997, requires countries participating in the euro-zone to present stability programmes to the Council and the Commission. These programmes provide information on how countries intend to meet the objectives of the Pact and in particular the medium-term goal of a budget close-to-balance or in surplus.

Full text of the Commission assessment available on:

http://europa.eu.int/comm/economy_finance/about/activities/sgp/year/year20032004_en.htm

Key figures of the updated stability programme of Portugal

⁽²⁾ Commission calculations based on the application of the methodology agreed by the Council to the figures of the updated stability programme.

^{(1) The recommendation calls for bringing the excessive government deficit to an end by 2003 at the latest.}