Macro View

(reading time: 4 mins)

Quick Comment: budget execution until April remains positive, +€134MnYtD; +€2.1Bn vs. 2024. Effective Revenues: +9.9%YtD, mainly due to lower reimbursements, IRS and VAT, while Effective Expenditures only +3.3%YtD, mainly due to a high base effect. Contributions (mainly social contributions) +8.1%YtD continues to outperform (target YE25: 5.4%), however the pace is slowing down. Finally, Public Debt Maastricht definition is consolidating close to 97% of GDP, as despite the favourable budget execution, surplus +€134MnYtD; debt Maastricht definition went up roughly €3BnYtD.      

The Bank of Portugal has just released, Government debt data in April.     

The main highlights are the following:

1 – Gross Government debt (Maastricht definition): €280,856Mn; +93bpMoM/+316bp YoY and 96.9% of GDP last 12months vs 12MMA (12 Months Moving Average): 97.2% and 3MMA: 96.6% (initial target YE25: 91.8%);

2 – Net Government debt (after the deposits of Public Administration; Maastricht definition): €260,447Mn; +37bpMoM/+7bpYoY and 89.9% of nominal GDP vs. 12MMA: 91.3% and 3MMA: 90.3%.

Separately, the Finance Minister released Friday  evening, April’s budget execution. We would highlight the following:

1 – Surplus: €134MnYtD; +€2,111Mn vs. 2024YtD (January till April) ;

2 – Surplus in percentage of GDP, on a cash basis, last 12 months: +0.85% vs. 12MMA: +0.6% and 3MMA: +0.7%;

3 – Effective Revenues +9.9%YtD vs. 12MMA: 6.4% and 3MMA: 9.2% (initial budget 2025: +9.8%);

Direct Taxes: +12%YtD vs. budget: +1.0% (IRS: +9.1%YtD and IRC: +12%YtD);

Indirect Taxes: +11.4%YtD vs. budget: +7.1% (VAT: +12.3% and “Tax on oil…”: +13.1%)  

Contributions (mainly social security contributions, CGA…): +8.1%YtD vs. budget: +5.4%;

Non-Tax and Non-Contributory Revenues (dividends, transfers…):  +7.8%YtD vs. budget +34.8%.

4 -  Effective Expenditure:  +3.3%YtD vs. 12MMA: 6.2% and 3MMA: 2.3% (initial budget: +11.5%);

Employees: +8.6%YtD vs. budget, 5.3%;

Purchase of Goods and Services: 2.5% vs. budget: 10.3%;

Interest and Other Charges: -8.4% vs. budget 2.6%;

Current Transfers (mainly pensions and social support): +0.7%YtD vs. budget: 4.0%;

Others (subsidies, Investment…): +14.4% vs. budget: 60%.

Comment: Public debt in relative terms is consolidating around 97% of GDP, while in absolute terms reached a new record €280Bn. Nevertheless, net debt, after deposits €260.4Bn is roughly flat on an yearly basis, +€178Mn, even that the budget surplus on a cash basis over the last 12 months is roughly €2.46Bn. The same is true regarding the last four months, surplus on a cash basis €134.8Mn, while Net Debt increased by roughly €3Bn YtD.

Finally, budget execution in April, outperformed mainly due to a strong performance of revenues, Effective Revenues: +9.9%YtD o/w IRS: 9.1%; IRC: 12% and VAT: 12.3%. Both, IRS and VAT strong performance is mainly due to lower reimbursements. Meanwhile, Expenditures: +3.3%YtD, the positive performance is mainly due to a high base effect.       

Source: Bank of Portugal, INE, AS Independent Research