Leão leaves Government with a deficit of 0.4% in the first quarter – Public Finances

The budget deficit recorded was 0.4% of GDP in national accounts in the first quarter, the last one under the management of former minister João Leão, the National Statistics Institute (INE) released this Friday, June 24th.

“The General Government balance in the first quarter of 2022 reached -233.6 million euros, corresponding to -0.4% of GDP, which compares with -6% in the same period last year”, advances the INE.

According to INE, the improvement in the budget balance compared to the first quarter of 2021 was mainly due to a significant increase in revenue, of 11.9%, but also to a decrease in expenditure by 1.4%. In the first quarter, 22,154 billion euros were collected in revenue, with taxes and social contributions showing increases above the double digits (or close).

Revenue from taxes on production and imports, which includes VAT – and whose collection can be seen as an indicator of economic activity – soared 25.1%, to 8,451 billion euros. Revenue from income taxes (IRS and IRC) increased by 11.6%, to 4,383.1 billion euros, and income from social contributions increased by 8.2%, to 6,510.2 billion euros.

“The positive evolution of tax and contributory revenue shows the recovery of economic activity and the labor market compared to the same period marked by containment measures within the scope of the pandemic”, emphasizes INE.

Slowdown in covid-19 reduced support to companies but not social benefits

On the expenditure side, there was a significant reduction in subsidies, by 77.8%, motivated by the “reduction of support paid to companies”, justifies the INE. In the first quarter of 2021, Public Administrations had spent 1,576.9 billion euros in this heading, this year the amount spent was 349.7 billion.

Interest expense also decreased by 12.6% to 1,150.3 million euros.

On the other hand, expenses with social benefits increased by 3.9%, to 9,652.8 million, and personnel expenses increased by 3.8%, to 5,738.4 million euros.

Intermediate consumption increased by 10.2% (to 2,956.4 million euros) and other current expenditure by 1.7% (1,380.9 million euros). Capital expenditure increased by 21.4%, as a result of the 21.3% growth in investment and 21.7% growth in other capital expenditure, totaling 1,158.9 million euros.

INE highlights that, in the comparison between homologous quarters, it is necessary to take into account the base effect, since, in January and February 2021, several measures were in force to combat the pandemic that strongly conditioned economic activity.

(News updated at 11:40 with more information)