TAP loan added to the deficit

Portugal’s National Statistics Institute INE has confirmed that a €1.2Bn bailout loan for national airline TAP will be included in the budget deficit.

The impact of the loan on the year’s budget accounts is estimated to be 0.57% of GDP, but the final amount will depend on the development of the economy in the fourth quarter. The budget deficit to September stood at 4.9% of GDP.
“The increase in capital expenditure reflects the register, based on the information available, of the financial support given by the State to TAP S.A. to the amount of €1.2Bn as a capital transfer,” states the statistics office in a communiqué issued just before Christmas.
The INE confirms the government’s expectation that the loan will be accounted for in the 2020 budget deficit as it had been in the Supplementary Budget and the State Budget 2021.
The INE adds, “This amount corresponds to the total amount of the commitment taken on by the State to finance the company, authorised by the European Commission with State support, taking into account the state of financial emergency the company is in.”
In total, and under the heading ‘Other Capital Expenditure’ the quarterly impact of this aid to TAP was 2.29% of GDP, but is reduced when taking into account Portugal’s annual GDP for 2020.
But for the third quarter of 2020 the increase in the deficit grew 303.6% on the same quarter in 2019.
The minister of infrastructure, Pedro Nuno Santos has already admitted that part of the €1.2Bn loan to TAP will not be returned to the State any time soon.
And with this capital injection from the State added to around €800 million injected into Novo Banco, if agreed, which it most certainly will have to be, the State Budget for 2021 is on track to become 5% of GDP instead of the 4.3% estimated in the original document.
Overall, it means that in just 2 years TAP already accounts for 1.1% of GDP on public accounts which will also be added to the public debt.
All told, financial bailouts to TAP could reach as much as €3Bn (1.5% of GDP) by 2023.