Portugal is reportedly to get more time to cut its budget deficit.
As part of Lisbon’s 78 billion euro bailout, inspectors from the ‘troika’ of lenders – the European Commission, European Central Bank and International Monetary Fund – are currently reviewing Portugal’s economy and bailout adjustments.
Reuters quotes sources involved in that review as saying Portugal is seen as making a good effort in the face of a wider European recession and so will be given an extra year, until 2015, to get the deficit below the required three percent of GDP.
“There’s a great adjustment effort, which is being recognised. There is a consensus (among the lenders) that the external setting has worsened and that Portugal needs another year to lower the deficit below three percent,” one source said.
Portugal’s finance ministry declined to comment.
The government had said it might need an extra year to narrow the deficit due to the worsening economic situation. Last month it downgraded its 2013 forecast to a GDP contraction of 1.9 percent from 1.0 percent.
The lenders had already eased Portugal’s deficit goals last year after tax revenues fell short, undermined by a slump in consumer demand and a rise in unemployment.
Lisbon’s current targets are to cut the deficit to 4.5 percent of GDP this year from last year’s 5 percent and then to 2.5 percent in 2014.