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OECD less optimistic than Portuguese gov't regarding budget deficit

Xinhua, November 29, 2016 Adjust font size:

Portugal is unlikely to manage to reduce its budget deficit to below 2.1 percent of gross domestic product (GDP) in 2017, the OECD said in a statement on Monday, adding that public reforms of expenditure should be carried out.

The Organization for Economic Cooperation and Development(OECD) said it forecast the budget deficit to reach 2.5 percent of GDP this year in line with the European Commission's forecasts.

However, the OECD is not as optimistic as Portugal's Socialist government when it comes to next year's forecasts, expecting the deficit to reach 2.1 percent of GDP, higher than the 1.6 percent target set by the Portuguese government.

"The budget margin is limited and the government should focus on the composition of expenditure and on taxes to support economic growth," the OECD said in a statement.

"Carrying out permanent reductions in current expenditure, especially in personnel costs, could free up resources to enable more productive spending," the statement adds.

The OECD also said it was concerned with Portugal's high level of public debt which still represents around 130 percent of GDP.

Public debt is expected to represent 130.5 percent of GDP this year and 129.5 percent in 2017, according to the OECD. The government expects a public debt of 129.7 percent this year and 128.3 percent in 2017.

The country's left-leaning anti-austerity ruling government led by Antonio Costa has been faced with stiff resistance by European Union (EU) lawmakers for missing the EU budget target last year as the country attempts to roll back austerity.

However, the European Commission recently affirmed that Portugal would continue to receive European funds, after the Commission approved all of the country's reports and assessments.

The Portuguese government has insisted that debt has been gradually falling since 2014 when the country exited a 78-billion-euro (82.53 billion U.S. dollar) bailout it signed in 2011 when it was on the verge of bankruptcy. Endit