Economics in a picture
Since 2011, government spending as a percentage of GDP recorded a significant decline
From 2011 to 2017, general government primary expenditure as a ratio to GDP posted a reduction, largely reflecting a decline in the share of public investment and compensation of employees in GDP. According to data by Statistics Portugal, these developments were mostly driven by lower spending on economic affairs, education, health, defence and public order and safety. Overall, between 2011 and 2017, these categories recorded in Portugal one of the sharpest reductions as a ratio to GDP amongst euro area countries.
Regarding economic affairs, the decline stemmed from a drop in investment on transport infrastructure. In the case of education, it is worth highlighting the reduction in compensation of employees and intermediate consumption across all schooling levels. In turn, the drop in government spending on health as a ratio to GDP was driven by the evolution of compensation of employees, especially as regards hospital services. The decline in expenditure on defence, public order and safety stemmed from a drop in military and police services.
In the most recent period, the decline in expenditure as a ratio do GDP was milder than during the Programme. It should be noted that pension outlays, which were the only spending category recording a positive cumulative change in 2011-2017, reduced their weight in GDP in the last years reflecting a marked deceleration in the number of pensioners.
For more details see Box 6: “Recent developments in public expenditure: Portugal in the context of the euro area”, published in the Economic Bulletin of Banco de Portugal, May 2018.
Prepared by Maria Manuel Campos. The analyses, opinions and findings expressed above represent the views of the authors and not necessarily those of Banco de Portugal or the Eurosystem.
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