Portugal swung to a budget surplus of 1.1 billion euros in the first half of 2022, compared to a deficit of 7.3 billion euros a year ago, as tax revenues soared thanks to strong economic growth amid high inflation, the government said on Wednesday.

The Portuguese economy experienced an 11.9% year-on-year rise in the first quarter, buoyed by the tourism sector, after growing 4.9% last year as it recovered from a pandemic-induced recession.

"The improvement in public budget accounts compared to the same period last year is strongly justified by the dynamism of economic activity," the finance ministry said in a statement.

It said that tax revenues increased by 28% to 25.9 billion euros between January and June, boosted by a 27% increase in Value Added Tax (VAT) revenues to more than 10 billion euros.

As VAT is a tax on the final price of products and services, its revenues automatically increase whenever there is inflation.

Portuguese consumer prices jumped 8.7% year-on-year in June, - their fastest pace since December 1992, up from 8% in May.

The finance ministry said total public revenue grew by 20% to 46.4 billion euros.

It said that public spending fell 1.7% to 45.3 billion euros in the first six months of 2022, mainly due to lower spending to support companies and families to tackle the Covid 19 pandemic and less interest paid on public debt.

The government envisages a deficit reduction to 1.9% of gross domestic product this year, compared with 2.8% in 2021.

Finance Minister Fernando Medina has said that Portugal will stick to its strategy of cutting its deficit and high debt to protect itself against the new cycle of European Central Bank (ECB) rate rises.

(Reporting by Sergio Goncalves Editing by Mark Heinrich)


Reuters