Portugal’s net expenditure seen rising 7.4% in 2026

Portugal’s Public Finance Council (CFP) estimates that the country’s net expenditure will rise 7.4% in 2026, moving further away from the path agreed with the European Commission. The net expenditure, rather than the headline budget balance alone, is the metric the EU now uses to assess whether member states are keeping spending in line with their commitments.

The 2026 estimate is above the 6.9% growth rate the CFP had projected in April. The watchdog said the slippage is mainly linked to tax measures that reduce state revenue and therefore worsen the net expenditure metric in the EU framework. It pointed in particular to the full-year effect in 2026 of the IRS Jovem tax break approved in 2025, stronger tax incentives for companies that reinvest capital, and the postponement to 2027 of the end of the SIFIDE tax incentive for research and development investment.

According to the CFP, the gap relative to the Brussels commitment is set to persist over the following two years, with net expenditure growth projected at 4.2% in 2027 and 4.5% in 2028. The institution said that outlook reflects the growing weight of current spending, including public sector wages and social benefits, which are rising more than it expected in April.

The warning comes even as the CFP continues to forecast a budget surplus of 0.2% of GDP in 2026. In the report’s assessment, a positive fiscal balance does not in itself mean compliance with European rules. The CFP also said its calculations do not yet include the new personal income tax cut announced by the government days ago, because it did not have the technical details needed to incorporate the measure.

Originally published at Eco.pt