Macro View

(reading time: 4 mins)

The budget execution, keeps performing surplus +€2,327MnYtD (until July) vs. a surplus of €940Mn in 2024 (until July), mainly due to Effective Revenues +7.1%YtD above Effective Expenditures, +5.1%YtD. Unfortunately, Net Debt vs. budget execution keeps underperforming, the Budget surplus €2,327MnYtD is not aligned with Debt increase, net of deposits, +€1.8Bn YtD.    

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

The main highlights are the following:

1 – Gross Government debt (Maastricht definition): €287,996Mn; +35bpMoM/+485bp YoY and 97.8% of GDP last 12months vs 12MMA (12 Months Moving Average): 96.6% and 3MMA: 97.9% (initial target YE25: 91.8%);

2 – Net Government debt (after the deposits of Public Administration; Maastricht definition): €259,205Mn; +15bpMoM/+50bpYoY and 88.0% of nominal GDP vs. 12MMA: 89.9% and 3MMA: 88.1%.

Separately, the finance minister released Friday evening, July’s budget execution. We would highlight the following:

1 – Surplus: €2,327Mn YtD; +€1,386Mn vs. 2024YtD (January till July);

2 – Surplus in percentage of GDP, on a cash basis, last 12 months: +0.59% vs. 12MMA: +0.71% and 3MMA: +1.16%;

3 – Effective Revenues +7.1%YtD vs. 12MMA: 5.4% and 3MMA: 9.1% (initial budget 2025: +9.8%);

Direct Taxes: +5.1%YtD vs. budget: +1.0% (IRS: +14.4%YtD and IRC: -9.6%YtD);

Indirect Taxes: +8.7%YtD vs. budget: +7.1% (VAT: +9.3% and “Tax on oil…”: +11.6%)  

Contributions (mainly social security contributions, CGA…): +8.3%YtD vs. budget: +5.4%;

Non-Tax and Non-Contributory Revenues (dividends, transfers…):  +5.8%YtD vs. budget +34.8%.

4 - Effective Expenditure:  +5.1%YtD vs. 12MMA: 6.2% and 3MMA: 7.3% (initial budget: +11.5%);

Employees: +8.8%YtD vs. budget, 5.3%;

Purchase of Goods and Services: 2.7%YtD vs. budget: +10.3%;

Interest and Other Charges: -1.0%YtD vs. budget +2.6%;

Current Transfers (mainly pensions and social support): +3.5%YtD vs. budget: 4.0%;

Others (subsidies, Investment…): +11.0% vs. budget: 60%.

Comment: Public debt before deposits, Maastricht definition, in July underperformed, +€998MnMoM, but it was mainly due to higher deposits, roughly +€623Mn MoM, as in fact Net Debt (after deposits) in July increased only €376Mn MoM. Debt, Maastricht definition, is close to 98% of GDP vs. the target of 91.8% by the end of the year, as usual, deposits should come down until year-end and public debt at YE25 should be close to the target.      

Meanwhile, July’s budget execution, released Friday evening, surplus €2,327Mn; +€1,386Mn vs. 2024 (January till July), continues to outperform mainly due to Effective Revenues +7.1% (IRS: +14.4%YtD and VAT: +9.3%YtD) above Expenditures +5.1%YTD, both evolving below budget target. Nevertheless, Net Debt, after deposits is roughly +€1.7Bn above December/24; while the Budget surplus is €2.3Bn, a gap difficult to explain      

Source: Bank of Portugal, INE, AS Independent Research