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Quick Comment: All in all, a positive budget execution, in 2025, even that structural expenditures, Employees: +8.2%YoY and Current Transfers: +5.1%YoY; continue to increase, partially offset by Interest Charges: -2.2%; Purchase of Goods & Services: +6.1% (budget: +10.3%) and Others (Subsides, Investment) +18.7% (target: +60%). Finally, Budget Surplus on a cash basis in 2025 +€1.3Bn (+€885Mn vs. 2024), mainly due to Effective Revenues +7.7%YoY (o/w IRS: +9.2%; IRC: -2.4% and VAT: +10.3%), vs Effective Expenditures: +7%. Nevertheless, the budget surplus in 2025 on a cash basis, +€1.3Bn, was not enough to reduce Public Net Debt; in fact, net debt increased roughly €3.9Bn YoY to €261Bn or before deposits, to €275Bn (+€3.9BnYoY), roughly 89.7% of GDP, below Government target 90.2%.          

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

The main highlights are the following:

1 – Gross Government debt (Maastricht definition): €274,776Mn; +144bpYoY/-235bpMoM and 89.7% of GDP last 12months vs 12MMA (12 Months Moving Average): 94.8% and 3MMA: 91.7% (target YE25: 90.2%);

2 – Net Government debt (after the deposits of Public Administration; Maastricht definition): €261,427Mn (+€3,865MnYtD) +150bpYoY/+96bpMoM and 85.3% of nominal GDP vs. 12MMA: 94.8% and 3MMA: 91.7%.

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

1 – Surplus in 2025: €1,298Mn;  +€885Mn vs. 2024 (January till December);

2 – Surplus in percentage of GDP, on a cash basis, last 12 months: +0.42% vs. 12MMA: +0.67% and 3MMA: +0.39%;

3 – Effective Revenues in 2025: +7.7% vs. 12MMA: 9.4% and 3MMA: 10.5% (initial budget 2025: +9.8%);

Direct Taxes 2025: +5.4% vs. budget: +1.0% (IRS: +9.2% and IRC: -2.4%);

Indirect Taxes, 2025: +8.6% vs. budget: +7.0% (VAT: +10.3% and “Tax on oil…”: +7.9%)  

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

Non-Tax and Non-Contributory Revenues (dividends, transfers…): +8.7%YtD vs. budget +34.8%.

4 - Effective Expenditure in 2025: +7.0% vs. 12MMA: 7.0% and 3MMA: 8.7% (initial budget: +11.5%);

Employees in 2025: +8.2% vs. budget, 5.3%;

Purchase of Goods and Services: 6.1% vs. budget: +10.3%;

Interest and Other Charges: -2.2% vs. budget +2.6%;

Current Transfers (mainly pensions and social support): +5.1% vs. budget: 4.0% (Pensions, unemployment benefits…: +7.5% and “CGA” (civil servant pensions): +5.1%);

Others (subsidies, Investment…): +18.7% vs. budget: 60%.

Comment: Public debt before deposits, Maastricht definition, in December, as expected outperformed, -€6.6Bn MoM; to €274.7Bn, roughly 89.7% of GDP, below government target. It was mainly due to lower deposits, as we mentioned in prior comments, Deposits went down €9.09Bn MoM to €13.3Bn and almost flat YoY. Nevertheless, net debt (after deposits) increased roughly €3.9Bn YoY , to €261.4Bn and compares with a budget execution over the last 12 months, surplus close to €1.3Bn. So Net Debt continues to increase despite budget surplus.         

Meanwhile, December’s budget execution, released Friday evening, surplus in 2025: €1.298Mn ; +€886Mn vs. 2024 keeps performing, mainly due to Effective Revenues in 2025: +7.7% (o/w IRS: +9.2%, VAT: +10.3%; Tax on Oil and Energy Products: +7.9%YtD and Social Security Contributions, +8.3%); above Effective Expenditures in 2025: +7.0% (o/w Employees, +8.2%; Purchase of Goods and Services: 6.1%YtD and Current Transfers: 4.8%).

Source: Bank of Portugal, INE, AS Independent Research