The European Commission forecasts this year a public deficit of 7.3% of the Gross Domestic Product (GDP), with the gap reduction to 4.5% in 2021 and 3% the following year.
The government expects a budget deficit ratio of 7.3% of GDP this year, followed by a decline to a negative balance of 4.3% in 2021, according to the state budget for next year.
“The Covid-19 pandemic is expected to negatively impact the public budget balance due to a deficit of 7.3% of GDP in 2020, reversing last year’s surplus,” the European Commission said, in the autumn economic projections. released this Thursday -market.
“The functioning of automatic stabilizers and support for fiscal policy must be the main culprits for this deterioration. In response to the Covia-19 crisis, measures were taken to strengthen the resilience of the health system, preserve jobs, provide adequate social services, protect business continuity and support
the resumption of activity, with a cost of the general direct budget estimated at around 3% of GDP ”, he explained.
“The multifaceted package of measures should lead to an increase in current spending, particularly in subsidies and
social transfers as well as capital expenditure related to rescue aid to airlines, ”he said. “Excluding the impact of the third activation of the Novo Banco contingent capital mechanism (0.5% of GDP) and other one-off measures, the budget balance is expected to reach a deficit of less than 6.75% of GDP in 2020” .
The EC explained that the deficit is expected to drop to 4.5% of GDP in 2021, due to the economic recovery and the reduction of the tax burden with the crisis mitigation measures.
In relation to public debt, the EC predicts that the GDP ratio at 135.1% this year, from 117.2% in 2019, “reflecting the sudden primary deficit and the denominator effect caused by the expected contraction of nominal GDP “.
In the next two years, on the other hand, the state leverage should decrease to 130.3% and 127.2% respectively, “benefiting from the expected recovery in GDP growth and the pre-financing of aid to the Recovery Fund. and Resilience ”, concluded the European institution led by Ursula von der Leyen.