Economists relaunch budget think tank over government public spending concerns

 In News, Public debt, Public deficit and Budget deficit, Public Finances, Public Spending

The Institute of Public Policy, a think tank from Lisbon-based economics and business management university ISEG that studies State Budget proposals, is to relaunch Budget Watch.

According to Jornal Económico, which spoke to economist Paulo Trigo Pereira who is coordinating the project, which involves some of the best Portuguese economists, the project had been suspended in 2023 because of improvements in Portugal’s deficit and debt.

However, Budget Watch is to be relaunched because of concerns over public accounts and the impact of recent measures approved by the government and opposition.

Budget Watch is a project that aims to foster greater transparency and budget discipline. After being suspended in 2023, the project has been reactivated “precisely because we are once again worried about the future of this country’s public finances”, said Paulo Trigo in the interview with Jornal Económico, calling the project the largest of its kind on budget transparency ever launched in Portugal.

“We’ve decided to relaunch it because we’re concerned about these ‘à la carte’ negotiations that all these corporations want (tax cuts),” said Paulo Trigo Pereira.

Concerns over balancing the budget have risen to the fore in recent weeks because of a series of policies approved by parliament. The Bank of Portugal has already warned that the policies will wipe out Portugal’s budget surplus if financial offsets are not put in place.

Ricardo Reis, Professor at the London School of Economics, in a recent interview with ECO, said that the recent government measures showed a desire for reform, but warned that despite there not being signs of budgetary irresponsibility, the government needed to tread with care.

The economist was one of 17 economists consulted by Prime Minister Luís Montenegro in January to prepare its Programme of Reforms and the Macroeconomic Situation that the centre-right coalition AD presented at the run-up to elections in March and included tax cuts, salary increases for key state employees, abolishing tolls on SCUT roads, new affordable housing incentives, pension increases, and reductions in capital gains tax on investments in the securities market.

He said that the government had to take into account the cost of accumulated measures, particularly given the situation regarding inflation and EU monetary policy, and warned that all of the measures would “make the public deficit worse or increase public spending”.