Picture: Alessandro Garofalo

Lison - Portugal is still expected to cut its budget deficit to four percent of economic output this year, even after the country's top court rejected some austerity measures, Fitch said on Tuesday.

“The latest ruling ... reduces a key near-term risk to consolidation and keeps the sovereign on track to hit its fiscal targets this year,” said the ratings agency in a statement.

Portugal's Constitutional Court last week rejected part of planned austerity measures in a blow to efforts by the government to cut its deficit to levels agreed with the European Union.

The country's top court rejected pensions tax that was expected to bring in 372 million euros (R5.3 billion) in 2015, but approved a temporary reduction in civil servants' pay.

“The ruling reinforces our view that Portugal will hit its 2014 fiscal target of a general government deficit of 4 percent of GDP,” or gross domestic product, said Fitch.

In 2015, the agency predicted Lisbon will reduce its public deficit even further to 2.75 percent, despite “the capacity of the court to constrain fiscal policy”.

Portugal is still struggling to rein in its finances after exiting a three-year international aid plan in May.

Lisbon plans to cut public expenditure to 43 percent of GDP in 2018, down from more than 48 percent last year, including by cutting jobs and salaries. - Sapa-AFP