Portugal 2015 budget bill sees 1.5 percent growth
By Sergio Goncalves and Daniel Alvarenga
LISBON (Reuters) - Portugal's government expects a second year of economic expansion in 2015 after the country began to climb out of its debt crisis this year and exited an international bailout, its 2015 budget bill showed on Wednesday.
The centre-right government forecast gross domestic product would grow 1.5 percent next year after a 1 percent expansion in 2014 - Portugal's first full year of growth since it sought a bailout in 2011.
Portugal imposed deep spending cuts and the largest tax hikes in living memory as it sought to bring its public finances under control during the bailout.
"It (2015) will be decisive for the sustainability of public finances, which is only possible after an intense adjustment effort," Finance Minister Maria Luis Albuquerque told journalists as she presented the budget.
She said the 2015 budget bill set an "important equilibrium between the responsibility of continuing with economic adjustment and the importance of boosting confidence and the economy's recovery".
The government would cut corporation tax next year to 21 percent from 23 percent but, despite pressure to cut income taxes as well, the minister said any such reductions would depend on efforts to clamp down on tax evasion during 2015 - an election year.
If the tax base increases thanks to those efforts, the government may lower income taxes and hand money back to taxpayers early in 2016, she added.
Still, next year's budget deficit - 2.7 percent of GDP - will be slightly above the previous target of 2.5 percent agreed with the European Union. This year the deficit goal is 4 percent of GDP although the country's statistical agency has forecast that it will reach 4.8 percent of GDP.
Albuquerque played down the change in the budget deficit, pointing out that 2015 will be the first time Portugal will manage to bring the deficit below 3 percent of GDP since it joined the euro.
"It won't be the first time the objective for the deficit is fixed under 3 percent but it will be the first time it will be effectively accomplished," she said.
Portugal's debt-to-GDP is expected to decline to 123.7 percent next year from 127.2 percent this year, the budget showed.
Portugal has benefited from falling bond yields this year, helped by rock-bottom rates by the European Central Bank and the return to calm in Europe after the euro zone debt crisis.
Still, in a sign of the still fragile situation in financial markets, Portugal's 10-year benchmark bond yields jumped nearly 30 basis points to 3.30 percent on Wednesday as worries over Greece and slowing global growth spooked global markets.
The European Commission said on Tuesday that Portugal "remains vulnerable to future negative shocks".
Unemployment, which hit record highs during Portugal's debt crisis, is expected to fall to 13.4 percent next year from 14.2 percent in 2014, the government said.
The government plans to carry out gross bond issuance of 12 billion euros next year while net financing needs will fall 4.3 billion euros to 10.989 billion euros in 2015, the budget bill showed.
(Reporting By Sergio Goncalves and Daniel Alvarenga, writing by Axel Bugge)
