Roundup: Portuguese state budget for 2017 to focus on income recovery: minister

Portugal revised its economic forecast in its state budget for 2017, expecting a larger deficit and lower growth compared to its forecast in April.

The government is expecting a deficit of 1.6 percent of GDP and a growth of 1.5 percent next year, Finance Minister Mario Centeno revealed on Friday during the presentation of the country's state budget for 2017.

"This budget focuses on the recovery of income, which translates in a reduction of the fiscal burden," Centeno said before going through the budget's main measures, adding that financial stability was a priority.

The state budget for 2017 was approved on Thursday at a council of ministers meeting and handed over to parliament on Friday.

The core of the budget is raising pensions and personal income, while introducing indirect taxes and a new property tax.

Measures in the budget for 2017 include gradually reducing income tax surcharge, raising pensions up to 630 euros by 10 euros from August and introducing a tax (0.3 percent) on real estate worth more than 600,000 euros.

The government is also going ahead with a "fat tax," with sugary drinks and alcohol rising by at least 16 cents per liter.

The ministry of health will have over 353 million euros more to spend in 2017 than it had in its budget for this year.

"The total expenditure consolidated in the health program forecast of 2017 is 9,801 million euros, which correspondents to a rise of 3.7 percent compared to the budget for 2016," Centeno said.

The culture sector will have a budget of 444.8 million euros for 2017, representing a 6.2 percent rise compared with 2016.

The unemployed who are no longer eligible to receive unemployment benefits will receive an extraordinary subsidy of long duration of up to 335 euros.

Portuguese Prime Minister Antonio Costa has been optimistic about the country's recovery since he took office in November, saying his spending plans are proof that reversing austerity can be done while maintaining fiscal discipline.

Portugal has avoided a sanction by Brussels, after breaching the EU deficit ceiling of 3 percent last year.

International rating agencies have been more sceptical than the government.

Ratings agency Fitch pointed out earlier this year that the government's plans were "unrealistic," adding that it expected growth to rise to 1.7 percent of GDP this year, rather than the 2.1 percent planned by the government in January.

The Bank of Portugal cut its growth forecast to 1.1 percent of GDP for this year, down from 1.6 percent last year, according to its quarterly economic bulletin released on October 7.

However, the government has said its forecasts in the budget plan are realistic and it will manage to meet commitments with the parties that approved the government and with EU rules.

Former minister of finance and professor at the Nova School of Business and Economics, Luis Campos e Cunha, said during a meeting with foreign correspondents in Lisbon on Friday that he is confident the government will meet its targets this year.

"The government's optimism gives me hope that it will be able to meet a (budget deficit) target of 2.5 percent," he said, adding that "If the government doesn't meet its targets, it will be a political disaster with serious consequences." (1 euro = 1.10 U.S. dollars)Endit