General Government budget outturn in 2024

In 2024, Portugal’s General Government maintained a budget surplus. The national statistical authorities reported a balance of 0.7% of GDP – exceeding the 0.2% forecast in the State Budget for 2024. Despite this favourable outcome, the surplus declined by 0.5 percentage points compared to 2023, when it stood at 1.2% of GDP. This deterioration was mainly due to the Central Government, while regional and local governments returned to a positive balance and the Social Security Funds continued to generate a significant surplus. The primary balance, which excludes interest payments, remained in surplus at 2.8% of GDP. With this performance, Portugal was one of six EU member states that recorded a surplus in 2024 and one of the four that maintained a positive balance for two consecutive years.

An analysis of the underlying developments of the budgetary position in 2024 shows that, excluding one-off operations, the reduction in the surplus was twice as large (1.0 p.p. of GDP) compared to the overall decline (0.5 p.p.), due to an expansionary fiscal policy. According to the Portuguese Public Finance Council (CFP), one-third of the annual decline in the budget balance was driven by cyclical economic developments, while the remaining two-thirds were driven by discretionary government measures, particularly the reduction of personal income tax (IRS), public sector pay increases, and higher social benefits, especially pensions. The structural primary balance, which reflects discretionary policy effects, fell by 0.6 p.p. of potential GDP. In this context, fiscal policy in 2024 was both expansionary and counter-cyclical. This assessment is further supported by an alternative analysis of fiscal impulse, which compares the growth of net expenditure with potential output. In 2024, primary expenditure financed by the national budget outpaced estimated potential output, confirming the expansionary stance.

The European Commission’s Spring Forecasts reported a 12% increase in net expenditure in 2024, slightly above the 11.8% approved by the EU Council. This result, consistent with the CFP’s opinion on the Annual Progress Report (RAP), indicates an unfavourable deviation of 0.1% of GDP to be considered in the 2025 expenditure path assessment. The Ministry of Finance, however, reported an 11.6% increase, suggesting a favourable deviation of -0.1% of GDP, with the difference stemming from how discretionary revenue measures were accounted for.

Public revenue in 2024 slightly exceeded the forecast in the State Budget, driven by strong tax and social contribution revenues, which which more than compensated for lower-than-expected capital and other current revenues. The shortfall in these latter categories was largely due to lower transfers from the Recovery and Resilience Plan (PRR) than initially projected. Compared to 2023, the increase in public revenue was mainly driven by taxation and social contributions, which together accounted for over 90% of the total growth. As a result, the tax burden (of GG) resumed its upward trend, reaching 35.6% of GDP. This was accompanied by record highs in the relative weight of social contributions on wages (22.1%), corporate income tax on gross operating surplus (18.6%), and VAT and excise duties on nominal private consumption (18.2%). Despite nominal revenue growth, its share of GDP remained stable at 43.5%, reflecting alignment with nominal GDP growth.

Public expenditure increased its share of GDP by 0.5 p.p. to 42.8% in 2024, in a year marked by PRR acceleration and the approval of new permanent measures. This increase was driven by the RRP’s impact (+0.3 p.p. of GDP) and the denominator effect, as nominal GDP growth (6.4%) lagged behind public expenditure growth (7.6%). In absolute terms, public spending rose by 8.6 billion € compared to 2023. Primary current expenditure was the main contributor, with all components increasing except subsidies. Interest payments rose in absolute terms but remained stable at 2.1% of GDP. Capital expenditure declined due to a sharp drop in “other capital expenditure,” influenced by fewer one-off operations. In contrast, gross fixed capital formation (GFCF) rose for the eighth consecutive year, driven in 2024 by national funding. Despite the increase, public spending remained below the forecast in the State Budget, mainly due to under-execution of RRP investments and, to a lesser extent, lower-than-expected interest payments. Conversely, primary current expenditure exceeded initial forecasts, particularly in social benefits and personnel costs, reflecting policy measures approved after the budget’s adoption.

By the end of 2024, more than halfway through the RRP’s implementation period, three-quarters of the plan had yet to be executed. A total of 5.5 billion € (24.6% of the plan) had been spent, of which 609 million € on financial assets, mainly for business capitalisation and financial resilience. Excluding this, RRP project expenditure totalled 4.8 billion €, with 4.3 billion € from EU grants and 538 million € from loans. Nearly three-quarters of this spending was directed towards economic investment, mostly through support for projects in other sectors. Despite the acceleration in 2024, expenditure that year totalled 2.5 billion €, representing a 45% execution rate compared to the State Budget forecast, due to significant deviations in GFCF and primary current expenditure. Additionally, 480 million € in loans not allocated to financial assets were used, deteriorating the budget balance by 167 million € more than expected.

The public debt-to-GDP ratio continued its downward trend, reaching 94.9% at the end of 2024 – 2.8 p.p. lower than in 2023. This reduction was mainly driven by the dynamic effect (-3.9 p.p.), supported by nominal GDP growth, which, influenced by inflation, more than offset interest costs. The primary balance contributed -2.8 p.p., while the deficit-debt adjustment had a negative impact of 3.8 p.p.. These developments, along with the revision of the national accounts statistical base in September 2024, helped bring the debt ratio below the 98.9% forecast by the Ministry of Finance. The share of debt held by non-residents increased to 45% by the end of 2024, up from 42% the previous year, while domestic exposure declined, particularly among the central bank and households.

Date of last update: 17/06/2025