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Quick Comment: A positive budget execution in January, surplus, €1.8Bn; +€188Mn than in January 2025; mainly due to Effective Revenues, +6.1%YtD vs. Effective Expenditures, +5.1%YtD. Indirect Taxes and Social Security contributions outperformed, while on the Expenditure side, Purchase of Goods -3.9%YtD and “Interest and Other Charges” -2.2%, also outperformed. The “Initial budget” points to a deficit in 2026 of €975Mn, which seems achievable, as there are on the expenditure budget some gaps, namely “Others” (includes subsidies , investments…) that could accommodate deviations.        

The Bank of Portugal released yesterday, January’s Government debt data (we could not comment yesterday, sorry for any inconvenience).     

The main highlights are the following:

1 – Gross Government debt (Maastricht definition): €280,857Mn; +234bpYoY/+221bpMoM and 91.7% of GDP last 12months vs 12MMA (12 Months Moving Average): 94.4% and 3MMA: 90.9% (target YE26: 87.8%);

2 – Net Government debt (after the deposits of Public Administration; Maastricht definition): €259,104Mn +90bpYoY/-89bpMoM (-€2.3Bn YtD) and 84.0% of nominal GDP vs. 12MMA: 94.4% and 3MMA: 90.9%.

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

1 – Surplus: €1,824Mn YtD (January);  +€188.3Mn vs. 2025 (January);

2 – Surplus in percentage of GDP, on a cash basis, last 12 months: +0.48% vs. 12MMA: +0.69% and 3MMA: +0.42%;

3 – Effective Revenues: +6.1%YtD (only January) vs. 12MMA: 8.9% and 3MMA: 11.8% (initial budget 2026: +8.6%);

Direct Taxes: -1.8%YtD vs. budget: +2.0% (IRS: -0.6% and IRC: -47%);

Indirect Taxes: +6.8%YtD vs. budget: +4.9% (VAT: +12.3% and “Tax on oil…”: +1.8%)  

Contributions (mainly social security contributions, CGA…): +8.3%YtD vs. budget: +5%;

Non-Tax and Non-Contributory Revenues (dividends, transfers…): +11.8%YtD vs. budget +30.5%.

4 - Effective Expenditure +5%YtD vs. 12MMA: 6.8% and 3MMA: 10.4% (initial budget: +10.5%);

Employees: +5.5%YtD vs. budget, 4.8%;

Purchase of Goods and Services: -3.9%YtD vs. budget: +2.3%;

Interest and Other Charges: -2.2%YtD vs. budget +5.1%;

Current Transfers (mainly pensions and social support): +5.5%YtD vs. budget: 6.6% (Pensions, unemployment benefits…: +4.2% and “CGA” (civil servant pensions): +4.1%);

Others (subsidies, Investment…): +20.77% vs. budget: 47.7%.

Comment: Public debt before deposits, Maastricht definition, in January, as expected underperformed, +€6.08Bn MoM; to €280.86Bn, roughly 91.1% of GDP, roughly +150bp MoM, it was mainly due to higher deposits, +€8.4Bn MoM to €21.7Bn; a safer figure than the number at year end €13.Bn. The low figure in December was mainly due to the government reach the target of public debt, 89.6% of GDP. Meanwhile, Net Debt, after deposits, outperformed, -€2.3Bn MoM, mainly explained by January’s budget surplus, €1.8Bn.      

Meanwhile, January’s budget execution, released Friday evening, surplus in January: €1.8Mn; +€188Mn vs. 2025 (January) a positive performance, Effective Revenues, +6.1%YtD, despite the underperformance of Direct Taxes, -1.8%YtD (mainly seasonal adjustments); fortunately, Indirect taxes keep performing, +6.8%YtD, o/w VAT: +12.3%YtD and Social Security contributions, 8.3%YtD (salaries close to +6% and jobs around +2%). Effective Expenditures, +5%, clearly below the budget, +10.5%; which we believe is inflated and should accommodate deviations.     

Source: Bank of Portugal, INE, AS Independent Research