Macro View

(reading time: 4 mins)

Quick Comment: the budget execution, keeps performing, surplus on a cash basis +€4.1Bn YtD (until October) and roughly +€830Mn above October 2024. Nevertheless, budget execution is usually negative in the last 2 months of the year (Christmas month extra salary and pension), so, according to budget execution in 2024 and average of the last two years, current surplus €4.1Bn should come down and finish the year finish between +€2Bn and €3Bn, on a cash basis. Meanwhile, government debt, Maastricht definition is now roughly at 93.2% of GDP vs. government target YE25; 90.2% and after a positive performance in October. As we mentioned before, it’s mainly Deposits that are coming down, so it should continue to adjust in November and December, currently €25Bn, to reach the target of 90.2% of GDP or below.     

The Bank of Portugal has just released, October’s Government debt data.     

The main highlights are the following:

1 – Gross Government debt (Maastricht definition): €283,146Mn; +491bpYoY/-308bpMoM and 93.2% of GDP last 12months vs 12MMA (12 Months Moving Average): 95.2% and 3MMA: 95.5% (target YE25: 90.2%);

2 – Net Government debt (after the deposits of Public Administration; Maastricht definition): €257,950Mn; +111bpYoY/+109bpMoM and 84.9% of nominal GDP vs. 12MMA: 87.5% and 3MMA: 85.2%.

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

1 – Surplus: €4,154Mn YtD; +€830Mn vs. 2024YtD (January till October);

2 – Surplus in percentage of GDP, on a cash basis, last 12 months: +0.39% vs. 12MMA: +0.61% and 3MMA: +0.44%;

3 – Effective Revenues +6.2%YtD vs. 12MMA: 6.1% and 3MMA: 5.6% (initial budget 2025: +9.8%);

Direct Taxes: +2.9%YtD vs. budget: +1.0% (IRS: +4.0YtD and IRC: -3.9%YtD);

Indirect Taxes: +8.0%YtD vs. budget: +7.1% (VAT: +9.0% and “Tax on oil…”: +10.8%)  

Contributions (mainly social security contributions, CGA…): +8.4%YtD vs. budget: +5.4%;

Non-Tax and Non-Contributory Revenues (dividends, transfers…): +5.2%YtD vs. budget +34.8%.

4 - Effective Expenditure: +5.6%YtD vs. 12MMA: 4.9% and 3MMA: 7.3% (initial budget: +11.5%);

Employees: +8.0%YtD vs. budget, 5.3%;

Purchase of Goods and Services: 5.0%YtD vs. budget: +10.3%;

Interest and Other Charges: -3.1%YtD vs. budget +2.6%;

Current Transfers (mainly pensions and social support): +4.2%YtD vs. budget: 4.0% (Pensions, unemployment benefits…: +7.3%YtD and “CGA” (civil servant pensions): +4.0%YtD;

Others (subsidies, Investment…): +12.3%YtD vs. budget: 60%.

Comment: Public debt before deposits, Maastricht definition, in October outperformed, -€11.2Bn MoM; to €283.1Bn, roughly 93.2% of GDP, it was mainly due to lower deposits, as we mentioned before. Deposits went down €11.2BnMoM; as in fact net debt (after deposits) increased roughly €2.8Bn MoM, slightly higher figure than the fiscal deficit only in October, on a cash basis, €2.15Bn.      

Meanwhile, October’s budget execution, released Friday evening, surplus €4.15Mn YtD; +€830Mn vs. 2024 (January till Oct.), continue to perform, mainly due to Effective Revenues +6.2%YtD (o/w IRS: +4.0%YtD, VAT: +9.0%YtD; Tax on Oil and Energy Products: +10.8%YtD and Social Security Contributions, +8.4%YtD); above Effective Expenditures +5.6%YTD, even so both evolving below budget targets. Finally, over the last two years the average deficit between November and December was around €€1.2Bn and last year it was €1.5Bn; so, the current surplus, €4.15Bn, should come down until year end, to positive figures between €2Bn and €3Bn, on a cash basis.          

Source: Bank of Portugal, INE, AS Independent Research