The national accounting balance (commitment perspective), relevant for European rules, is anticipated, while the Directorate-General for Budget reports the monthly public accounting balance based on a cash perspective, which allows predictions regarding the evolution of public accounts.
Consolidated budget execution data until April (cash perspective) indicate a slight budget surplus of 0.1% of GDP (135 million euros), compared to a deficit of 2.1% during the same period last year (-1,977 million euros), according to a BPI Research note.
The improvement in the budget balance “reflects the increase in revenue surpassing that of expenditure,” notes Vânia Duarte, who foresees the public accounts maintaining a positive figure in 2025.
“The continuation of an economic growth scenario (albeit decelerating), a robust labor market (with an expected increase in employment and wages in 2025), and reduced financing costs (aligned with the ECB’s more flexible monetary policy) will remain important factors supporting public accounts this year,” she concludes.
The Forum for Competitiveness, in its latest economic report, also highlighted that “until April 2025, the budget balance recorded a surplus of 135 million euros in public accounting (from a cash perspective).”
“Total revenue continued to rise above budgeted, mainly due to the strong growth in VAT, resulting from a significant reduction in refunds, but now also in income tax,” the document states.
Total expenditure, on the other hand, “is below projected (especially in interest), except for personnel expenses,” while public investment “is also growing less than foreseen in the annual target, particularly regarding the National Health Service (SNS).”
The Parliamentary Budget Support Unit (UTAO) highlighted in a report published in April that “the budget balance achieved in 2024 provides a more favorable starting point for 2025, although there are downside budget risks for the current year that were not considered in the State Budget.”
Despite the boost from the 0.7% GDP surplus achieved in 2024, “in 2025, the policy measures legislated in 2024 and pensions are expected to continue to exert downward pressure on budget performance, adding to the acceleration in PRR implementation, with a projected increase of 569 million euros in financing burdens,” the UTAO warned.
For the year as a whole, the Government remains confident in a surplus of 0.3% of GDP. During a parliamentary discussion on the Government Program, Joaquim Miranda Sarmento recalled that the AD Government “exceeded expectations” last year by achieving a surplus of 0.7%, “more than triple what the previous government had forecast.”
For 2025, the Government maintains the “commitment to budget balance” and projects a surplus of 0.3% of GDP, even at a time when institutions monitoring Portuguese public accounts are projecting a return to budget deficits this year or next.
The Bank of Portugal does not provide quarterly forecasts for the budget balance, but in the latest Economic Bulletin from June, it signaled that “after a surplus of 0.7% of GDP in 2024, budget deficits of 0.1%, 1.3%, and 0.9% are expected in 2025, 2026, and 2027, respectively.”
The Public Finance Council forecasts a zero balance this year (0.0%), turning into a 1% deficit in 2026, according to their latest projections from April.
