The public balance calculated by the Ministry of Finance services until the end of the third quarter of 2025 “reinforces the expectation of a budget surplus this year”, already measured in national accounting, the perspective that counts for the European Commission and the external assessment of the country by other entities, such as the IMF, OECD, global banks, international creditors and the various rating agencies, for example.
According to an analysis note by Vânia Duarte, an economist at BPI’s research office, the budget execution until September, released by the Budget Entity supervised by minister Joaquim Miranda Sarmento, “seems to reinforce the expectation of a budget surplus this year (in national accounting)”.
“Although there are still factors of pressure on public accounts in the last months of the year”, such as “lower IRS revenue resulting from new withholding tax rates”, “the payment of the Christmas bonus to public servants” or an expected acceleration in the execution of public investment, “data up to September increase the probability of the budget balance ending 2025 in positive territory, contrary to our expectation of a slight deficit”.
In national accounts, from a compromise perspective for expenses and revenues, the Government estimates that it will end this year with a surplus equivalent to 0.3% of the Gross Domestic Product (GDP), indicates Miranda Sarmento in the 2026 State Budget proposal, released on October 9th.
It is, so far, the most positive estimate among the main entities that study the Portuguese economy.
Also in October, the International Monetary Fund (IMF) predicted a surplus of 0.2% of GDP. Before this, in September, the Public Finance Council (CFP) predicted a zero balance (0%).
In June, the Bank of Portugal (BdP), still under the governance of Mário Centeno, warned the government with a forecast deficit of 0.1% of GDP this year. At the time, these BdP accounts caused some discomfort in Finance and the government of Luís Montenegro.
The European Commission’s latest forecast for this year dates back to last May and at the time pointed to a small surplus of 0.1%. This month, Brussels updates the macroeconomic scenario for Portugal, as well as the rest of the European Union countries.
BPI Research indicates that “the consolidated data on budget execution in the first nine months of the year (from a cash perspective)”, therefore, from the perspective of Finance, administrative data that consolidates the expenditure actually made (the money that actually came out of the public coffers) and the revenue actually received, “reveal a budget surplus of 2.8% of GDP (i.e. 6,304 million euros)”, which compares with “2.6% of GDP in the same period last year (the equivalent of 5.693 million euros)”.
The same analyst states that “revenue continues to increase at a faster rate than expenditure”.
Revenue rises almost 7%
The amount that entered the public coffers rose 6.6% year-on-year in the nine months under review this year (compared to the same period in 2024). In other words, Public Administrations allocated “more than 5,890 million euros” in the period under analysis, calculates the research department of the bank, which is part of the giant Spanish group Caixa Bank.
The main explanations for this behavior “continue to be tax revenue and Social Security contributions, which, together, explain around 86% of the year-on-year increase in public revenue”.
“Among the various taxes, the highlight is the increase of almost 945 million euros in IRS, 1,515 million euros in VAT” and, to a lesser extent, the increase of “310 million euros” in the collection of the Tax on Petroleum Products (ISP).
In turn, “Social Security contributions alone explain almost 2,000 million euros” of the total increase in revenue in the January-September period, “that is, more than 30% of the growth in total revenue”.
Even so, says BPI, “it is important to note that IRS revenue benefited from the reduction in refunds compared to the same period last year (724 million euros less), which ended up mitigating the effect of the reduction in withholding tax rates in August, with an effect on September revenue”.
Expenses increase by around 6%
Expenses increased “supported by personnel expenses and current transfers”.
The year-on-year increase in total spending was 6.3% year-on-year, that is, the public sector spent “more than 5.280 million euros” compared to a year ago.
Here, the same study office highlights, “in a similar way to previous months, the increase in personnel expenses (plus 1,744 million euros compared to the same period last year, that is, 8.7% more), resulting from the salary update of public servants (in line with that registered in the OE 2025) and the valorization of careers; and current transfers (2,333 million euros more, 6.2% more year-on-year), with the effect of ordinary updates and payment additional”.
Public investment, which has been hampered for several years by poor execution (it is always well below what is promised annually) finally stands out on a positive note: up to September, it increased by 811 million euros, but 17.8% compared to the same period last year.
BPI says that this jump is a reflection of “investments in housing and other constructions in the Local Government, along with other investments made with the Recovery and Resilience Plan (such as student accommodation) and military investments (such as the purchase of the A-29N Super Tucano aircraft)”.