Budget execution analysis
Monthly budget execution data, published by the Directorate-General for Budget (DGO), are an important source of almost “real-time” information on the status of public accounts. They allow assessing not only the short-term trends of the various items, but also the adequacy and feasibility of the targets set in the Budgets.
The availability of this information has been subject of major improvements in recent years. This effort, led by DGO and accompanied by public sector entities that contribute with up-to-date data, is of greatest importance for budget transparency so that academics, journalists and citizens in general can scrutinize public finance management.
The Institute of Public Policy uses this data to carry out regular analyzes of the State Budget execution, analyzing the implementation of the Budget and the prospects for meeting the deficit targets, in some cases seeking to forecast their value at the end of the year.
The methodology followed in these analyzes for estimating the deficit has an incremental logic: from estimates of the final budget execution, obtained by relating the available data of the budget execution to the historical patterns of the various items, we calculate partial “deviations” that allows to forecast the deviation of the deficit from the official target.
This methodology has, naturally, associated simplifying hypotheses. Therefore, basing estimates only on patterns and their relationship to data of that year excludes the possibility that the effects of new policy measures or other extraordinary reasons may change the intra-annual profile of the evolution of items. However, not only practical experience, but also academic literature, point to a large inertia of trends in the components of public spending, so historical trends have proved to be a fairly effective forecaster.
It should also be noted that budgetary execution data are reported in public accounting and based on these we estimate a deviation from the budget balance which is assessed, in terms of statistics and from the point of view of European rules, in national accounts. It is assumed that the deviation of the balance in public accounting will be equal to the deviation in national accounts. This does not, at first, raise major problems – it ignores only the effects of financial transactions that affect liabilities or rights of the public administrations that do not have an immediate correspondence in terms of cash.
Below you can access the budget execution analysis file prepared by the Institute of Public Policy (in Portuguese), having this project produced monthly analyzes since October 2015.