LISBON, June 26 (Reuters) - Portugal's public sector deficit doubled to 698 million euros ($781 million) in the first five months of 2017 from a year earlier, but the finance ministry said it was due to early tax refunds and it was still on track to narrow this year.
Overall spending rose 1.4 percent, pushed higher by the refunds and a sharp 15 percent rise in investment, while revenues were stable in January-May.
"Throughout the rest of the year the effects of the early refunds will dissipate," the ministry said in a statement, adding that extra tax refunds in the period totaled over 1.5 billion euros. Income tax refunds exceeded those at the same time last year by six times as they are now processed faster.
"After good results in the first quarter that showed a deficit of 2.1 percent of GDP, this result shows that this year's target is within reach," it said.
After achieving a deficit of just 2 percent last year - the lowest in Portugal since at least 1975 - the government now aims to cut the gap to 1.5 percent in 2017.
The budget deficit narrowed to 1.7 percent of gross domestic product in the 12 months ending in March from 2 percent at the end of last year, official data showed on Friday. In the first quarter alone the deficit narrowed to 2.1 percent from 3.3 percent in the same period of 2016.
Discounting debt payments, the country had a primary surplus of 2.7 billion euros in January-May. ($1 = 0.8933 euros) (Reporting By Andrei Khalip Editing by Jeremy Gaunt)