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(Updates with minister’s comment in eighth paragraph.)
Sept. 30 (Bloomberg) -- Portugal’s budget deficit last year was 9.8 percent of gross domestic product, more than previously announced, after unreported debt of the island region of Madeira was included.
The revision “essentially” reflects debt and spending not reported earlier by Madeira, the National Statistics Institute said in an e-mailed statement today. The government and the institute previously said the 2010 shortfall was 9.1 percent of GDP. The deficit for the first six months of 2011 was 8.3 percent, down from 10.4 percent a year earlier.
Prime Minister Pedro Passos Coelho is cutting spending and raising taxes to meet the terms of a 78 billion-euro ($106 billion) aid plan from the European Union and the International Monetary Fund. As the country’s borrowing costs surged, Portugal followed Greece and Ireland in April in seeking a bailout. The government has already announced a one-time income-tax surcharge to help cover a budget shortfall this year.
The deficit of 9.8 percent in 2010 “was already expected due to the events in Madeira,” said Cristina Casalinho, chief economist at Banco BPI SA in Lisbon. It’s possible that more austerity measures are needed, she said. “It will depend a lot on revenue and spending in the remaining months of 2011. We believe the targets will be met.”
The government aims to trim the deficit to 5.9 percent in 2011 and within the EU ceiling of 3 percent in 2013. Debt will reach 100.8 percent of GDP this year and peak at 106.8 percent in 2013 before starting to decline, the government predicted on Aug. 31. Debt was 93.3 percent of GDP in 2010, the statistics institute said today.
The Bank of Portugal and the statistics institute said on Sept. 16 that Madeira had unreported debts. The Finance Ministry said that day it had no knowledge of other unreported debt or spending and considers Madeira an “isolated case.”
The region of Madeira had debt of 6.3 billion euros at the end of the first half, Portuguese Finance Minister Vitor Gaspar said in Lisbon today. The government doesn’t plan any more tax increases this year, he said.
Madeira didn’t report debts or expenses that had a combined impact of 1.2 billion euros on the 2008, 2009 and 2010 deficits, the statistics institute said today.
The government needs to improve control over expenditure and cut spending to meet its budget-gap targets as it seeks to regain access to bond markets in 2013, the IMF said in a report released on Sept. 13.
Portugal’s economy will contract 2.2 percent this year and between 2.2 percent and 2.3 percent in 2012, before expanding 1.2 percent in 2013, according to government forecasts.
--With assistance from Anabela Reis and Henrique Almeida in Lisbon. Editors: Jeffrey Donovan, Leon Mangasarian
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