March 201 7 - DGO · March 2017 reached -501.8 and +1,289.8 million euros, respectively, results having implicit an improvement of the overall and primary balance (in 254.4 and 210.7

March 2017

Budget Outturn Summary Report

Monthly edition

Portuguese version published on the 26th

April 2017

Budget General Directorate

Internet site: http://www.dgo.pt

Email: [email protected]

1. Summary

DGO - Portugal


March 2017

1

OVERALL BALANCE

1. Summary

According to the implementation data available until March 2017, the General Government deficit on a

cash basis approach (that is, revenues minus payments) amounted to 358.4 million euros, which has subja-

cent an improvement of 290.5 million euros, compared to the amount recorded in the same period of 2016

(-648.8 million euros).

Table 1 – General Government consolidated accounts

Note: Cash basis amounts consolidated of flows among different subsectors; differences against the values published in 2016 are due to

data updates.

(1) This reflects the revenue amounts that would be obtained if it was applied to 2016 the current accounting criterion of the ADSE (public

health subsystem of civil servants and pensioners) revenue in 2017 (as a service provision, included in the aggregate of "other current

revenue"). It should be noted that, until 2016, ADSE's revenues were accounted as contributions. Source: Budget General Directorate

Period: January to March € Millions

2016 2017 February March February March

Current revenue 17 188,4 17 478,0 -136,6 289,6 -1,1 1,7 1,6

Tax 10 025,7 9 950,7 -238,8 -75,0 -3,3 -0,7 -0,4

Social security contributions 4 660,3 4 677,5 -36,4 17,2 -1,1 0,4 0,1

Other current revenue 2 485,9 2 775,3 123,8 289,5 7,1 11,6 1,6

Consolidation differences 16,6 74,4 14,8 57,9 - - 0,3

Capital revenue 410,9 464,4 -1,3 53,5 -0,5 13,0 0,3


Effective revenue 17 599,3 17 942,4 -137,9 343,1 -1,1 1,9

Adjusted revenue for purposes of comparability (1):

Social security contributions 4 531,9 4 677,5 47,8 145,6 1,5 3,2 0,8


Current expenditure 17 299,7 17 201,3 -146,7 -98,3 -1,3 -0,6 -0,5

Compensation of employees 4 473,5 4 473,9 -16,7 0,4 -0,6 0,0 0,0

Purchase of goods and services 2 203,9 2 374,9 132,1 171,0 10,2 7,8 0,9

Interests and other charges 1 871,1 1 860,8 -18,6 -10,3 -1,2 -0,5 -0,1

Current transfers 8 425,8 8 058,8 -286,1 -367,0 -5,0 -4,4 -2,0

Subsidies 163,4 173,0 35,1 9,5 40,8 5,8 0,1

Other current expenditures 159,2 224,2 6,9 65,1 6,7 40,9 0,4


Capital expenditure 948,4 1 099,4 159,4 151,0 25,9 15,9 0,8

Investments 757,0 869,0 136,0 112,0 28,8 14,8 0,6

Capital transfers 174,4 200,3 0,9 25,9 0,7 14,9 0,1

Other capital expenditures 13,6 30,1 15,3 16,5 124,9 120,9 0,1

Consolidation differences 3,4 0,0 7,2 -3,4 - - 0,0

Effective expenditure 18 248,1 18 300,7 12,7 52,6 0,1 0,3

Overall balance -648,8 -358,4 -150,7 290,5 - -

Primary expenditure 16 377,0 16 439,9 31,3 62,9 0,3 0,4

Current balance -111,3 276,7 10,1 387,9 - -

Capital balance -537,6 -635,0 -160,8 -97,5 - -

Primary balance 1 222,3 1 502,4 -169,2 280,2 - -

Cumulative implementationRelative (%)

YOY Change

Contribution

(p.p.)

Absolute

1. Summary

2 DGO - Portugal

Budget Outturn Summary Report March 2017

This evolution resulted from the combined effects of the increase in revenue (1.9%) and the slight expendi-

ture rise (0.3%), the latter maintaining the moderate growth trend of previous months, with the primary

balance being a surplus of 1,502.4 million euros, 280.2 million euros more than in the same period of the

previous year.

Revenue’s evolution has shown an inflection (-1.1% until February), with particular emphasis on other cur-

rent revenues, influenced by a better performance of the EU transfers component. With regard to tax rev-

enue, although it is lower in the first quarter of 2017 than in the same period of the previous year - due to

temporary and base effects and to the increase in the volume of reimbursements -, the recovery trend con-

tinued.

The increase in expenditure over the same period (+0.3%) was due in particular to the acquisition of health

goods and services and investment. On the other hand, the contraction of current transfers was influenced

in particular by flows to the EU budget and to households (pensions).

The General Government balance’s evolution benefited from the improvement in the balance of all sub-

sectors, with exception of the Autonomous Region of Madeira, which was in part influenced by the effect

of the regularization of interest, arising from swap contracts.

Table 2 – General Government budgetary implementation – revenue, expenditure and balance

Note: Cash basis amounts not consolidated of flows among different subsectors; differences against the values published in 2016 are due to data updates. Source: Budget General Directorate

Central Government and Social Security balance until March 2017 amounted to -501.8 million euros

(-756.3 million in 2016), while the primary balance was +1,289.8 million euros (+1,079 million in 2016). Rev-

enue’s change rate was +1.2% and both expenditure and primary expenditure decreased (-0.4% and -0.1%,

respectively).

Regional and Local Government recorded a balance of 143.5 million euros (198 million euros for the Local

Government and -54.5 million euros for the Regional Government). This result compared favorably to 107.5

million euros in 2016.

Period: January to March € Millions

2016 2017 2016 2017 2016 2017 Revenue Expendi ture

Central Government and Socia l Securi ty -756,3 -501,8 16 517,1 16 710,1 17 273,4 17 211,9 1,2 -0,4

Centra l Government (CG) -1 494,6 -1 379,9 12 819,8 12 895,5 14 314,4 14 275,4 0,6 -0,3

State subs ector -1 798,7 -1 699,7 10 006,4 9 900,1 11 805,1 11 599,8 -1,1 -1,7

Autonomous Services a nd Funds 304,0 319,8 6 613,2 6 859,9 6 309,1 6 540,1 3,7 3,7

of which: CG State Owned Enterprises -244,2 -254,0 1 893,5 1 969,0 2 137,7 2 223,0 4,0 4,0

Socia l Securi ty 738,3 878,0 6 308,4 6 470,6 5 570,1 5 592,6 2,6 0,4

Regional Government -25,2 -54,5 486,3 532,7 511,5 587,3 9,6 14,8

Local Government 132,7 198,0 1 374,3 1 580,8 1 241,7 1 382,8 15,0 11,4

General Government -648,8 -358,4 17 599,3 17 942,4 18 248,1 18 300,7 1,9 0,3

Expenditure YOY Change Rate (%)RevenueOverall balance

2. Central Government and Social Security

DGO - Portugal


March 2017

3


OVERALL BALANCE

Central Government and Social Security overall and primary balances implicit to the implementation until

March 2017 reached -501.8 and +1,289.8 million euros, respectively, results having implicit an improvement

of the overall and primary balance (in 254.4 and 210.7 million euros, respectively) over the last year. Reve-

nue increased by 1.2% (showing an inflection over February's result, -2.3%) and expenditure decreased by

0.4% (until February, the reduction was -0.2%).

Table 2 - Central Government and Social Security consolidated accounts

(1) This reflects the revenue amounts that would be obtained if it was applied to 2016 the current accounting criterion of the ADSE

(public health subsystem of civil servants and pensioners) revenue in 2017 (as a service provision, included in the aggregate of "other

current revenue"). It should be noted that, until 2016, ADSE's revenues were accounted as contributions. Source: Budget General Directorate and Social Security Financial Management Institute

Period: January to March Million euros

February March February March

Current revenue 16 217,3 16 344,9 -291,1 127,6 -2,5 0,8 0,8

Tax 9 396,3 9 216,7 -332,6 -179,5 -4,9 -1,9 -1,1

Direct taxes 3 610,1 3 386,6 -246,8 -223,5 -10,0 -6,2 -1,4

Indirect taxes 5 786,2 5 830,2 -85,8 43,9 -2,0 0,8 0,3

Social security contributions 4 658,1 4 675,2 -36,3 17,2 -1,1 0,4 0,1

Current transfers 419,7 368,7 44,3 -51,0 16,0 -12,1 -0,3


Consolidation differences 32,7 107,9

Capital revenue 299,8 365,2 27,1 65,5 15,5 21,8 0,4

Sale of investment good 75,7 54,5 -20,8 -21,3 -33,3 -28,1 -0,1

Capital transfers 169,3 248,7 47,1 79,4 48,2 46,9 0,5

Other capital revenue 54,7 19,3 0,1 -35,5 0,5 -64,8 -0,2


Effective revenue 16 517,1 16 710,1 -264,1 193,0 -2,3 1,2

Memo Item:

Tax and contributions revenue 14 054,3 13 892,0 -368,9 -162,4 -3,7 -1,2 -1,0

Non tax revenue 2 462,8 2 818,1 104,8 355,4 6,0 14,4 2,2

Adjusted revenue for purposes of comparability (1):

Social security contributions 4 529,7 4 675,2 47,9 145,6 1,5 3,2 0,9

Non tax revenue 2 591,2 2 818,1 20,6 227,0 1,1 8,8 1,4

Other current revenue 1 839,0 1 976,4 -58,1 137,3 -4,4 7,5 0,8

Current expenditure 16 417,5 16 367,9 -67,4 -49,5 -0,6 -0,3 -0,3

Employees 3 677,9 3 670,6 -17,6 -7,3 -0,7 -0,2 0,0

Purchase of goods and services 1 647,2 1 768,0 102,1 120,8 10,8 7,3 0,7

Interests and other charges 1 835,3 1 791,6 -12,7 -43,7 -0,9 -2,4 -0,3

Current transfers 8 973,6 8 702,7 -183,1 -270,9 -3,0 -3,0 -1,6

Subsidies 150,6 164,7 36,8 14,1 45,9 9,4 0,1

Other current expenditure 132,9 191,5 4,4 58,7 5,1 44,1 0,3


Capital expenditure 855,9 844,0 44,8 -11,9 7,6 -1,4 -0,1

Investments 575,2 595,3 86,6 20,2 23,6 3,5 0,1

Capital transfers 268,3 223,6 -65,1 -44,7 -30,1 -16,7 -0,3

Other capital expenditure 8,7 25,0 16,3 16,3 198,5 186,5 0,1


Effective Expenditure 17 273,4 17 211,9 -22,5 -61,4 -0,2 -0,4

Memo Item:

Current and capital transfers 9 241,9 8 926,3 -248,2 -315,6 -4,0 -3,4 -1,8

Other current and capital expenditure 141,6 216,6 20,7 75,0 22,1 52,9 0,4

Overall balance -756,3 -501,8 -241,5 254,4

Primary expenditure 15 438,1 15 420,3 -9,9 -17,7 -0,1 -0,1 -0,1

Current balance -200,2 -23,1 -223,7 177,1

Capital balance -556,1 -478,8 -17,8 77,4

Primary balance 1 079,0 1 289,8 -254,2 210,7

YOY Change

Rate Contrib.

(p.p.)

Cumulative

implementation

Revenue/exependiture/balance Absolute Relative (%)

2016 2017 YOY cumulative change


4 DGO - Portugal


EXPENDITURE

Central Government and Social Security expenditure decreased 0.4% in the first quarter of 2017 (-0.2%

until February) and primary expenditure year-on-year change was -0.1% (maintaining the same contraction

level, when compared with February cumulative implementation), the latter being mainly explained by the

evolution of transfers. Note that the interest and other debt charges expenditure decreased by 2.4% (-0.9%

until February).

The employees’ compensation decreased 0.2% (-0.7% until February), reflecting the combination of ef-

fects with opposite impact on this expenditure item’s evolution.

Thus, driving in the direction of decrease, it highlights the reduction of the part of the Christmas bonus paid

by twelfths1, as well as of the corresponding public employers’ contributions to social security systems; and

ii) The sliding, from December 2015 to January 2016, of a part of the contribution of public employers to the

social security systems, even if taking into account the legal deadlines for the delivery of these amounts.

In turn, it should be emphasized the effect of pressure on expenditure resulting from: i) The fact that, in

2016, it occurred a phased reversal of the remuneration reduction in the Public Administration; in particular,

in the first quarter of 2016, the reduction at the end of 2015 was reversed by 25%2; ii) The raise in the meal

allowance determined by the Government3; and iii) Sectoral effects regarding the National Health Service

(new hires) and public schools.

The purchase of goods and services expenditure’s change rate (+7.3%, comparing with 10.8% until Febru-

ary) was associated to the health sector, having been determined by the expenditure with the public health

subsystem (ADSE4) and with purchase of health services and medicines by the National Health Service. Ex-

cluding the Ministry of Health’s expenditure, the acquisition of goods and services would decreased by 1%.

Interest and other charges expenditure decreased 2.4% (-0.9% until February), mainly determined by the

variation of the current charges related to the State direct debt (-2%). This result was justified, on the one

hand, by the base effect associated with the maturity, in February 2016, of a series of Treasury Bonds and,

on the other, by the reduction of the borrowing costs under the Economic and Financial Adjustment Pro-

gram, as a result of loans’ amortizations to the International Monetary Fund in 2016.

Transfers change rate was -3.4% (-4% until February), to which contributed most significantly the decrease

in Portugal's financial contribution to the EU budget (-27.4%), as a result of lower requests of funds by the

1 In 2017, only half of the Christmas bonus paid to the public sector employees, retirees and pensioners of the general and convergent social protec-

tion regimes is processed by twelfths. On its turn, in 2016, the whole of this benefit was paid by twelfths. 2 The Law No. 75/2014, of the 12th September established the following remuneration reductions: “3.5% of the total value of remuneration over € 1500

and less than € 2000 plus 16% of the value of total compensation in excess of € 2000, making an overall reduction between 3.5% and 10% in the case of

greater than or equal remuneration € 2000 up to € 4165; for wages greater than € 4165, a single cut rate of 10% is to be applied”.

The same law reverted the remuneration reduction by 20% in 2015.

In 2016, the remaining remuneration reduction was reversed during that year, at the rate of an additional 20% per quarter, in accordance with article

2 of Law 159-A / 2015, of December 30. 3 From € 4.27 per day to € 4.52 (article 20 of the 2017 State Budget Act). 4 ADSE is a public-sector institute with participatory management responsible for managing the public health subsystem of civil servants and pen-

sioners, other than military and security forces (which have a special health subsystem).


DGO - Portugal


March 2017

5

European Commission5. Moreover, there was a contraction of pension expenditure (-1.8% regarding the

general social security scheme and -3.8% in which concerns the convergent social protection scheme for

pensions, managed by Caixa Geral de Aposentações6), which , in part, was justified by the reduction in the

Christmas bonus’ parcel that is subject to a payment by twelfths.

The increase in subsidy expenditure (+9.4%), as well as the evolution regarding February cumulative imple-

mentation (+45.9%), was attributable to the evolution of vocational training subsidies co-financed by the

European Social Fund (+46%, compared to +175.4% until February).

The investment expenditure grew 3.5%, driven by the State's charges on public-private partnerships in the

area of road infrastructure (+6.8%). The lower growth rate of these charges (+36.8% until February), which

was associated with the specificity of the intra-annual execution profile associated with the financial obli-

gations contained in the respective contracts, was on the basis of the evolution in the same direction of

investment expenditure as a whole (+23.6% up to February).

Other expenditure increased 52.9%, influenced by the different annual profile of payments to Parque Es-

colar, E.P.E. 7 by education institutions having already benefited from the modernization program of public

schools, as well as by the behavior of expenditure on training courses co-financed by European funds by

non-high education institutions. The evolution of the first of these components justified the acceleration of

other expenditure as a whole (+22.1% until February).

REVENUE

Central Government and Social Security revenue increased 1.2%8 until March 2017, with emphasis on the

contribution of the non-tax and non-contributory revenue (1.4 p.p.) and contributory revenue (0.9 p.p.),

despite the unfavorable behavior of tax revenue (-1.1 p.p.).

The inversion of the revenue behavior (until February, it decreased 2.3%) was attributable to the favorable

evolution of its components. In particular, in which concerns tax revenue, the level of contraction over the

observed result until February decreased by 3 p.p..

Tax revenue evolution (-1.9%) was the result of the decrease in direct tax revenues (-6.2%), despite the

indirect taxes revenue’ increase (+0.8%).

Direct taxes’ reduction was justified by the decrease in the Corporation Income Tax (CIT) revenue (-36.6%)

- mainly due to the temporary effects on withholding tax in the first months of 2016, as well as the increase

5 Under the current Community legislation, the European Commission may, in order to ensure proper management of the treasury of the European

Union budget, request, in the first months of the year, the advance of monthly twelfths of own resources based on VAT and GNI. 6 Caixa Geral de Aposentações (CGA) is the public body that administrates the Portuguese civil servants pension scheme. However, from 2006 on-

wards, the new civil servants became part of the general social security scheme, so that the pension system managed by CGA has been closed since

that year. 7 Parque Escolar is a public corporation under the responsibility of the Ministry of Education which object is that of planning, managing, developing

and executing the modernisation programme for the public network of non-high education establishments. 8 It should be noted that the comparability between contributory revenue, on the one hand, and non-tax and non-contributory revenue, on the other,

is influenced by the fact that from 2017 onwards the public health subsystem’s contributions are accounted for as a service provision (revenue com-

ponent included in the second of the referred aggregates). In order to ensure comparability between the two years, this section considers a 2016

revenue adjustment, consisting of adding 128.4 million euros to non-tax and non-tax revenue and excluding this amount from contributions, with

no impact on the overall level of revenue.


6 DGO - Portugal


in the volume of reimbursements – and in the Personal Income Tax (PIT) revenue (-2.7%) - attributable to

the reduction of withholding taxes associated with the surcharge and the capital income.

The decrease in direct tax revenue was less pronounced than until February (-10%), which was due to the

similar evolution of the CIT (-68.8% until February) and PIT (-4.6% until February).

The growth of indirect taxes revenue was due to the behavior of the Value Added Tax (VAT) (+3.6%), the

Vehicle Tax (+26%) and the Stamp Tax (+7%). Note that the revenue from the Tax on Oil and Energy Prod-

ucts (TOEP) (-14%) and the Tobacco Tax (-26.9%) was negatively influenced by the base effect of the ac-

counting for approximately 149 million euros of revenue from these taxes, referring to 2015, but which was

only collected in the beginning of 2016, owing to the day-off granted by the Government to civil servants

on the 31st December 2015.

The reversal of indirect revenue’s behavior (-2% until February) was due to the lower contraction in the

TOEP revenue (-25.3% until February) and the increased VAT growth (2.2% until February).

The Social Security systems contributions’ change rate (+0.4%) was, as mentioned before, determined by

the change in accounting for revenue managed by the public health subsystem in 2017. If, for comparison

purposes, the amount corresponding to March 2016 cumulative revenue was excluded, contributions would

have increased by 3.2% (+1.5% until February), due to the increase in contributions received by the Social

Security (+5.5%, compared with +4.5% until February), mainly reflecting the improvement in employment

levels.

The non-tax and non-contributory revenue, considering the symmetrical effect of that described in the

previous paragraph, grew 8.8%9.

9 The growth of 8.8% was influenced by the increase in consolidation differences (which represents around 4.6 pp) and the entry of

the Mutual Counter-guarantee Fund in State Budget perimeter, from the beginning of the 2016 State Budget implementation

(April). Without this effect the variation would have been 2.7%. The above mentioned consolidation differences arise mainly from

non-compatible flows between central government entities, particularly the health sector.

Documents

March 201 7 - DGO · March 2017 reached -501.8 and +1,289.8 million euros, respectively, results having implicit an improvement of the overall and primary balance (in 254.4 and 210.7