Portuguese budget deficit shrinks 58% in 2022 amid strong revenue

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LISBON, Jan 28 (Reuters) – Portugal’s state budget deficit fell 58% to 3.59 billion euros in 2022, thanks to a sharp rise in tax revenue due to strong economic growth amid high inflation , said the government.

Finance Minister Fernando Medina told Reuters in November that the economy was expected to grow at least 6.7% in 2022, boosted by domestic demand and tourism, after growing 4.9% last year. earlier as it recovered from a pandemic-induced recession.

The finance ministry said in a statement late on Friday that the improvement in the budget deficit was “justified by the dynamism of the labor market and the economy and the effect of inflation”.

He said tax revenue increased by around 14% to 25.9 billion euros last year, boosted by a 19% increase in value added tax revenue to more than 21 billion euros.

Since VAT is a tax on the final price of products and services, its income automatically increases whenever there is inflation.

Portuguese consumer prices rose 9.9% year-on-year in November, just shy of the three-decade high of 10.1% in the previous month.

The finance ministry said that total public revenue grew by 11% to more than 102 billion euros, while public spending increased by only 5.1% to 105.7 billion euros.

Prime Minister Antonio Costa last month said the public deficit could be below 1.5% of GDP in 2022, compared to the previous official forecast of 1.9% and the fiscal gap of 2021 of 2.9%. (Reporting by Sergio Goncalves; Editing by Alison Williams)

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