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Government Debt increased in February €1.56Bn MoM and is now around 91.2% of GDP (target YE26: 87.8%), above 3MMA. Meanwhile, the budget execution in February (YtD), surplus €1.99Bn, roughly -€127Mn than in Feb/25, as Effective Revenues +5%YtD are growing below Expenditures, +6,9%. On the revenue side, IRS, VAT, IRC were weaker, while Contributions (mainly social security contributions) + 7.9%YtD grew below moving averages. A slowdown on this item (Contributions have grown above 8% since 2021 due to migration and salaries), would pressure the budget execution.         

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

The main highlights are the following:

1 – Gross Government debt (Maastricht definition): €282,711Mn; +196bpYoY/+55bpMoM and 91.2% of GDP last 12months vs 12MMA (12 Months Moving Average): 94.2% and 3MMA: 90.7% (target YE26: 87.8%);

2 – Net Government debt (after the deposits of Public Administration; Maastricht definition): €260,986Mn +58bpYoY/+61bpMoM (-€0.736Bn YtD) and 84.2% of nominal GDP vs. 12MMA: 86.0% and 3MMA: 84.5%.

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

1 – Surplus: €1,992Mn YtD (January and February);  -€127Mn vs. 2025 (January + February);

2 – Surplus in percentage of GDP, on a cash basis, last 12 months: +0.38% vs. 12MMA: +0.67% and 3MMA: +0.43%;

3 – Effective Revenues: +5.0%YtD (Jan + Feb) vs. 12MMA: 8.3% and 3MMA: 6.8% (initial budget 2026: +8.6%);

Direct Taxes: 1.0%YtD vs. budget: +2.0% (IRS: +1.0% and IRC: -42%);

Indirect Taxes: +1.1%YtD vs. budget: +4.9% (VAT: +0.7% and “Tax on oil…”: +3.1%)  

Contributions (mainly social security contributions, CGA…): +7.9%YtD vs. budget: +5% (12MMA: 8.2%/3MMA: 8.1%);

Non-Tax and Non-Contributory Revenues (dividends, transfers…): +13.3%YtD vs. budget +30.5%.

4 - Effective Expenditure +6.3%YtD vs. 12MMA: 7.3% and 3MMA: 6.7% (initial budget: +10.5%);

Employees: +5.8%YtD vs. budget, 4.8%;

Purchase of Goods and Services: +8.0%YtD vs. budget: +2.3%;

Interest and Other Charges: -0.7%YtD vs. budget +5.1%;

Current Transfers (mainly pensions and social support): +6.9%YtD vs. budget: 6.6% (Pensions, unemployment benefits…: +3.5%YtD and “CGA” (civil servant pensions): +4.9%);

Others (subsidies, Investment…): +7.5% vs. budget: 47.7%.

Comment: Public debt before deposits, Maastricht definition, in February, increased +€1.56Bn MoM; to €282.7Bn, roughly 91.2% of GDP and +55bp MoM, there wasn’t a direct justification, as deposits were almost flat MoM and in February the budget surplus was €168Mn. Meanwhile, on a yearly basis, net debt increased roughly €1.5Bn, while the excess surplus, over the last 12 months, is roughly €1.17Bn; so absolute debt level keeps underperforming.   

Finally, February budget execution, YtD, was slightly on the weak side, surplus +€1.99BnYtD, roughly, -€127Mn vs. 2025; mainly due to Effective Revenues, +5%YtD (o/w IRS: +1%; IRC: -42%; VAT: +0.7% and Contributions: +7.9%) below moving averages vs. Effective Expenditure: +6.3%YtD (o/w Employees: +5.8%; Current Transfers, +6.9% and Purchase of Goods/Services: +8%).   

In a nutshell, government Debt increased €1.56Bn MoM and is now around 91.2% of GDP (target YE26: 87.8%), while the budget execution in February (YtD), surplus €1.99Bn, roughly -€127Mn than in Feb/25, as Effective Revenues +5%YtD are growing below Expenditures, +6,9%. On the revenue side, IRS, VAT, IRC were weaker, while Contributions (mainly social security contributions) + 7.9%YtD grew below moving averages. A slowdown on this item would pressure the budget execution         

Source: Bank of Portugal, INE, AS Independent Research