Portugal Uses €2.8 B Surplus to Cut Taxes and Boost Local Projects

Portugal’s treasury closed the first eleven months of 2025 in unexpectedly solid shape, booking a €2.836 B surplus even after higher public-sector pay packets and a costly rollout of new social measures. Below is what sits behind the headline figure and why it matters for families, councils and businesses from Braga to Faro.

Fast facts at a glance

• €2.836 B overall surplus – up €633.9 M on 2024

• Revenue up 6.7 % year-on-year; spending up 6.5 %

• Social Security balance added €1.456 B to the upside

• Local authorities chipped in €470 M more than a year ago

• Central government still negative by €1.208 B

A stronger surplus – but not everywhere

The headline gain masks contrasting performances inside the public sector. Social Security funds surged, propelled by rising wages and almost full employment, while municipal coffers benefited from record property tax inflows and EU recovery money. By contrast, ministries and state agencies ran deeper red ink, in part because of salary upgrades and health-care wage agreements. Regional administrations also slipped slightly, shaving €84 M off the positive total.

Five-year view: from big deficits to black ink

Only three years ago Portugal was still wrestling with pandemic-era holes. The turnaround is visible:

• 2020: deficit near 7 % of GDP

• 2021: deficit narrowed to 2.8 %

• 2022: down to 0.4 %

• 2023: swung to a 1.2 % surplus (≈ €3.194 B)

• 2024 (Jan-Nov): €2.202 B surplus

• 2025 (Jan-Nov): €2.836 B, cementing the trendThe latest number is still shy of 2023’s full-year record but shows Portugal is holding onto hard-won fiscal credibility longer than many EU peers.

Where the extra money came from

Revenue climbed at a clip of 6.7 %, outpacing expenditure by a whisker.• Direct taxes: €24.385 B (+3.7 %). The IRS personal-income take jumped 8.5 % to €16.315 B, reflecting higher salaries; IRC corporate receipts fell 3.8 % as profits normalised post-Covid.• Indirect taxes and contributions: A vibrant tourist season fattened VAT, while payroll levies rose with employment.• Late-payment arrears fell to €720.6 M, freeing cash otherwise frozen.

Where the money went

Overall expenditure grew 6.5 %; primary spending was even faster at 7.6 %.

• Personnel costs up 8.2 %, largely because of wage step-ups across the public sector and a new nursing career ladder in the Serviço Nacional de Saúde.

• Social transfers expanded as the government front-loaded support for child-care and long-term care networks.

• Capital spending accelerated under the Recovery and Resilience Plan, though absorption lags behind Brussels’ timetable.

Government playbook for the windfall

Lisbon’s draft 2025 budget channels the cushion into a mix of tax relief and targeted investment:

IRS bracket update (4.6 %) plus an expanded IRS Jovem exemption for about 400 k recent graduates.

Corporate tax (IRC) trimmed by 1 pp, with a lower tier for SME profits up to €50 k.

Public-sector wage lift to preserve purchasing power.

Housing incentives – IMT and stamp-duty waivers for first-time buyers under 35.

Extra €3.7 B for social action and a 5.4 % bump in defence outlays.The Finance Ministry argues that even after these steps the state can still close 2025 with a 0.3 %-of-GDP surplus.

Economists split on durability

• Optimists (several bank research desks) see momentum and hint the surplus could overshoot official targets.• Bank of Portugal and the fiscal watchdog urge caution, flagging the €2.6 B price tag of new measures and a potential cooling of cyclical revenues.• IMF and S&P project a return to balanced budgets or small deficits by 2026, citing defence costs and EU-funded capital projects that demand national co-financing.

Why households should care

For residents, the surplus is not a remote ledger entry. Lower IRS rates, faster processing of health-service payments and more municipal investment in schools and transport are immediate pay-offs. The larger cushion also pushes public-debt ratios toward 90 % of GDP, easing future borrowing costs and, ultimately, mortgage rates. Still, analysts warn that if growth slows or interest rates stay high, room for give-aways could disappear quickly.

Bottom line

Portugal’s fiscal scoreboard looks healthier than at any point since joining the euro. Whether the €2.836 B buffer evolves into lasting financial firepower or melts away in new commitments will define the economic script of 2026 and beyond.