Public Expenditure and Fiscal Consolidation in Portugal
38 Pages Posted: 25 Mar 2012
Date Written: March 31, 2005
By analysing the evolution of public expenditure from 1990 to 2004, Cunha and Braz aim at assessing the Portuguese current fiscal position and the prospects for future developments in the absence of corrective measures and structural reforms. They argue that the current difficult budgetary situation in Portugal is largely due to the lack of fiscal consolidation before 2002. Between 1990 and 2004 the cyclically adjusted current primary expenditure rose by nearly 11 percentage points of nominal trend GDP, mainly owing to the increase in social payments and in the compensation of employees. Most of the growth in social payments reflects the evolution of pension expenditure in both the private sector and the civil servants systems. This growth trend is expected to continue in the coming years. The structural measures on the expenditure side undertaken since 2002 concern the civil servants pension system, the National Health Service, the subsidisation of interest on loans for house purchase and the limits on municipality financing.
Keywords: Public expenditure, Fiscal policy
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