The Minister of Finance should be able to reach the end of this year with a deficit below that provided for in the state budget, which came into force just over two weeks ago, indicates the Technical Budget Support Unit (UTAO) in a report on the accounts of public administrations from January to March 2022 of the year.
“The known data for 2022 in the national accounts, although only for the 1st quarter, gives positive indications of the likelihood of exceeding the planned budget target,” say technical specialists who support MPs in the parliamentary committee on budget and finance, despite the risks of war in Ukraine. And inflation helps to achieve a better-than-expected result.
“In the remaining quarters of 2022, it is expected that revenue may continue to benefit from the inflationary context, as well as the fact that the total net costs with COVID-19 measures will be lower than in 2021,” UTAO acknowledges. . On the other hand, the parliament’s technical specialists recognize “downside risks associated with economic development in the coming quarters, namely in relation to the impact of monetary policy on the expectations of economic agents and the government’s fiscal response to pressure” due to the conflict in Ukraine. which may represent “additional costs compared to those provided for in the second proposal of the state budget for 2022” (OE 2022).
In OE 2022, Finance Minister Fernando Medina expects a deficit of 1.9% of gross domestic product (GDP), a value already included in the Stability Program presented by his predecessor João Leão in March.
In the first quarter of this year, the general government budget balance in public accounts that matters to Brussels was -0.4% of GDP, 5.5 percentage points better than the same period in 2021 when the economy closed. again due to the covid-19 pandemic.
VAT and IRS are higher than before the pandemic
The UTAO specialists conclude that the “very favorable” dynamics of government accounts was largely due to three factors: GDP growth, increased tax revenues and reduced spending on measures to combat coronavirus. “Summarizing, we can say that the very favorable dynamics of the budget balance on an annualized basis in the first quarter of 2022 has the following main explanations: a significant increase in nominal GDP (12.5%); ), a strong response from tax revenues (+20.1%) and lower fees from COVID-19 policies excluding community co-financing (-49.7%),” the document said Monday.
In other words, if you subtract the costs of the pandemic – remember that the first three months of 2021 still required a lot of support from businesses and families – tax revenue and economic growth account for a third of the balance sheet improvement.
Otherwise, there are taxes that are already above pre-health crisis levels. “In terms of tax evolution, VAT and IRS revenues have already exceeded pre-pandemic levels in nominal terms,” the UTAO said in a statement.
(News updated at 18:15)
