Portugal to hit deficit targets despite court ruling - Fitch

Tuesday 19 August 2014 14.51
Fitch still confident Portugal will hit deficit targets
Fitch still confident Portugal will hit deficit targets

Portugal is still expected to cut its budget deficit to 4% of economic output this year, even after the country's top court rejected some austerity measures, Fitch said today. 

"The latest ruling reduces a key near-term risk to consolidation and keeps the sovereign on track to hit its fiscal targets this year," the ratings agency said in a statement. 

Portugal's Constitutional Court last week rejected part of planned austerity measures in a blow to efforts by the government to cut its deficit to levels agreed with the European Union. 

The country's top court rejected a pensions tax that was expected to bring in €372m in 2015, but approved a temporary reduction in civil servants' pay. 

"The ruling reinforces our view that Portugal will hit its 2014 fiscal target of a general government deficit of 4% of GDP," Fitch said.
 
For 2015, the agency predicted that Lisbon will reduce its public deficit even further to 2.75%, despite "the capacity of the court to constrain fiscal policy". 

Portugal is still struggling to rein in its finances after exiting a three-year international aid plan in May. 

Lisbon plans to cut public expenditure to 43% of GDP in 2018, down from more than 48% last year, including by cutting jobs and salaries.