Government posts impressive public accounts. Surplus reaches 0.7%

The 2025 public accounts surplus stood at 0.7% of GDP, an upward revision from the 0.3% of GDP estimated by the Ministry of Finance in the 2026 State Budget (OE2026), according to the first notification under the Excessive Deficit Procedure for 2026 from the National Statistics Institute (INE), released on Thursday.

The Minister of Finance, Joaquim Miranda Sarmento, who is due to comment on the national accounts results in a few minutes’ time, had already anticipated a better-than-expected surplus, ranging from 0.5% to 0.7%, and had even gone so far as to say that 2025 would be “a pleasant surprise”.

The INE’s findings now point to a balance in the national accounts – the one that counts for Brussels – that is far more favourable for Portugal. For the second consecutive year, Miranda Sarmento has managed to present a ‘shining’ performance in the public accounts. In 2024, the estimated surplus was also higher than the 0.4% forecast. INE’s preliminary estimate pointed to a surplus of 0.7%, later revised downwards to 0.5%, and this Thursday slightly upwards to 0.6%.

The public debt ratio also improved, falling to 89.7% of GDP. The 2026 State Budget had estimated 90.2%, but data from the Bank of Portugal (BdP) in February already predicted a reduction to 89.7%, down from 93.6% the previous year and the lowest figure since June 2010 (93.6%), that is, in 15 years.

“According to the provisional results for this financial year, the General Government (GG) recorded a surplus of €2,058.6 million in 2025, corresponding to 0.7% of GDP (0.6% in 2024). General government gross debt is estimated to have fallen to 89.7% of GDP (93.5% in the previous year)”, according to the same statistical note. INE notes that, “in accordance with European Union Regulations”, the institute “will send Eurostat, by the end of this month, the first notification of 2026 regarding the Excessive Deficit Procedure (EDP)”.

Portuguese public finances thus returned to a surplus in 2025 and public debt continued its downward trend, reaching its lowest level as a percentage of GDP since before the sovereign debt crisis, according to data released by INE.

According to the notification under the Excessive Deficit Procedure, the General Government recorded a surplus of €2,058.6 million in 2025, equivalent to 0.7% of Gross Domestic Product, up from the 0.6% recorded in the previous year.

This increase in the surplus stems from a virtually parallel trend in revenue and expenditure: total revenue grew by 6.7%, whilst expenditure rose by 6.6%. Nevertheless, the budget balance improved by around €196 million compared with 2024, consolidating a trend of positive balances that began in 2023.

According to INE, “the general government’s net lending increased by €196.1 million between 2024 and 2025”, the result of a virtually symmetrical trend in revenue and expenditure, both growing by over 6%.

The surplus was underpinned by strong growth in public revenue, which reached €133 billion, 6.7% higher than in the previous year. This growth was driven mainly by current revenue, particularly taxes and social contributions, reflecting the dynamism of the economy and the labour market.

Nevertheless, the improvement in the overall balance masks significant differences between the various levels of government. Central Government maintained a high deficit of €5.6 billion, which worsened compared to the previous year, whilst Social Security recorded a surplus of over €7 billion and Local Government also posted a positive balance.

This structural imbalance highlights that the overall surplus depends heavily on the performance of the Social Security funds, in a context where the Central Government remains under pressure from expenditure.

The primary balance — a key indicator of fiscal sustainability — also improved, rising to €8.023 billion, “remaining positive as in 2024”, which shows that the government generates a surplus even before interest payments.

Debt falls to 89.7% of GDP

At the same time, public debt continued to fall in relative terms. The general government debt-to-GDP ratio stood at 89.7% in 2025, down from 93.5% in 2024 and a far cry from the 111.2% recorded in 2022, according to the report.

This represents a significant reduction over just a few years, underpinned by successive budget surpluses and nominal economic growth. Nevertheless, in absolute terms, debt rose slightly, reaching around €275 billion, reflecting the effect of GDP growth on the ratio.

The projections included in the document point to a continuation of this trend in 2026, with debt falling to 87.5% of GDP, albeit accompanied by a smaller surplus (0.1% of GDP).

Tax burden rises and helps sustain surplus

The improvement in public finances was supported mainly by growth in tax revenue, which rose by 6.7% to €108.7 billion. This performance reflected the expansion of economic activity and the labour market, as well as the impact of prices, particularly on taxes on production and imports.

As a result, the tax burden rose slightly to 35.4% of GDP, 0.2 percentage points higher than in 2024.

On the expenditure side, growth was driven mainly by public sector wages and social benefits, against a backdrop of wage adjustments and pension increases.

The data confirm a path of fiscal consolidation in Portugal, marked by consecutive surpluses and a reduction in the debt-to-GDP ratio. However, structural challenges remain, notably the central government deficit and the pressure from social expenditure against a backdrop of demographic ageing.

Future developments will depend on the ability to maintain surpluses in a scenario of lower growth and to accommodate additional pressures on public expenditure, within a European framework that has once again tightened budgetary rules.