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Portugal budget deficit narrows by end of first half, on target

Fruits are shown at Lavradores market in Funchal, Portugal, March 31, 2017. REUTERS/Rafael Marchante

LISBON (Reuters) - Portugal’s budget deficit narrowed to 1.4 percent of gross domestic product in the 12 months ended in June from 1.6 percent at the end of the first quarter, largely in line with the deficit target for this year, official data showed on Friday.

The National Statistics Institute, which confirmed the official budget deficit estimate for 2017 at 1.5 percent, said that in the first half alone the deficit fell to 1.9 percent of GDP from 3.1 percent in the same period of 2016.

The INE said that in the 12 months to June, revenues rose 0.3 percent while spending edged 0.1 percent lower from March.

The INE also said that its deficit estimate does not include any impact from the recapitalization of state-owned bank Caixa Geral de Depositos by the state worth around 4 billion euros, or 2.1 percent of GDP.

The government has said it expects Brussels to disregard the recapitalization in this year’s deficit.

Last year, the budget gap narrowed to 2 percent - the country’s best result since at least 1975, leading the European Commission to end a disciplinary process against Portugal for running excessive deficits of over 3 percent.

The Socialist government expects economic growth to accelerate to over 2 percent this year from 1.4 percent in 2016.

Reporting By Andrei Khalip