(5) | Based on the data provided by the Commission after reporting by Portugal before 1 March 2004 in accordance with Council Regulation (EC) No 3605/93 of 22 November 1993 on the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing the European Community (4), and on the Commission Spring 2004 forecast, the following conclusions are warranted:
— | The general government deficit is estimated at 2,8 % of GDP in 2003, compared with 2,7 % in 2002 and 4,4 % in 2001. The outcome for 2003 complied with the Council Recommendation issued under Article 104(7), particularly as regards the reduction of the government deficit below the reference value of 3 % of GDP by 2003 at the latest. Fiscal adjustment was pursued in 2003 on the back of a sustained deceleration in the pace of total current primary expenditure growth from 8,9 % in 2001 to 7,8 % in 2002 and 4,1 % in 2003. However, the current cyclical downturn, which ended in a recession in 2003, led to a significant deviation of 2,6 percentage points between the GDP growth outcome for the year and the initial budgetary projection. As a result, a massive shortfall in tax revenue developed during 2003, which had to be offset by the adoption of two one-off measures, together worth 2,1 % of GDP. |
— | The structural measures taken by the Portuguese authorities, having a more direct impact on public finances, fall mainly on three areas: (i) public administration; (ii) the healthcare sector; and (iii) education. In particular, the quasi-freeze of wage scales and employment in the civil service in the period 2003-2004 is expected to have favourable base effects in the future, thereby having a significant structural impact. In addition, the Portuguese authorities estimate that the ongoing comprehensive reform in the healthcare sector has already had, in 2003, some positive effects on both expenditure savings and productivity gains. |
— | The Commission 2004 Spring forecast projects a general government deficit of 3,4 % of GDP for 2004, thereby significantly above the official target of a deficit of 2,8 % of GDP. The difference can basically be accounted for by: (i) somewhat lower growth than assumed in the budget; (ii) base effects associated with the one-off measures taken in 2003; and (iii) the planned partial replacement so far of such one-off measures. Therefore, additional measures are needed in order to prevent the government deficit from rising above the 3 % of GDP reference value in 2004 and following years. |
— | After the cut-off date for the Commission Spring 2004 forecast, the Portuguese authorities made public their intention to carry out further (real-estate related) operations to allow the deficit to stay below 3 % of GDP in the current year. |
— | According to the values reported in the first 2004 EDP notification, the government debt ratio was kept below the 60 % of GDP reference value in 2003, thereby in accordance with the Council Recommendation issued under Article 104(7), although it has steadily increased since 2001, and according to the Commission Spring 2004 forecast, is projected to exceed that value in 2004. |
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