Portugal’s Q3 Surplus Shrinks: What Expats and Residents Should Know

Portugal’s public finances remained comfortably in surplus during the summer, yet the newest figures from the National Statistics Institute (INE) suggest that the cushion is getting thinner. A 3.8 % of GDP surplus in the July-to-September period still puts the country among the Euro area’s better performers, but it is a visible retreat from the 4.9 % registered one year earlier. Revenue keeps expanding, though not fast enough to match a renewed burst of public spending. Whether Lisbon can still end 2025 with the government’s promised 0.3 % annual surplus is now in the spotlight.

The essentials at a glance

• Budget balance, Q3 2025: €2.952 bn surplus (3.8 % of GDP)

• Change from Q3 2024: down from 4.9 % of GDP

• Revenue growth (Jan–Sep): +7 % year-on-year

• Spending growth (Jan–Sep): +7.7 % year-on-year

• GDP performance, Q3: +2.4 % YoY | +0.8 % QoQ

• Government target for 2025: 0.3 % surplus

• European Commission outlook: balanced budget (0 %) for 2025, -0.3 % deficit in 2026

Fading yet solid: a 3.8 % surplus

INE’s quarterly release shows that the public sector collected €2.952 bn more than it spent between July and September. The absolute figure looks robust, but on a GDP basis the difference versus 2024 is clear. The cooling reflects two simultaneous moves: overall receipts accelerated by 7.7 %, while total outlays jumped 10.8 %. Because national output also expanded, the headline surplus ratio inevitably fell. Still, Lisbon remains one of only a handful of Euro area capitals running a surplus at all.

Where the money keeps pouring in

Portuguese coffers benefited from buoyant tax and contribution inflows, boosted by resilient employment and still-elevated nominal wages. According to execution reports up to October, central-government revenue touched €55.99 bn, a 4.2 % rise versus the same stretch of 2024. Corporate taxes linked to tourism, export-oriented manufacturing and IT services provided the strongest uplift. Capital receipts, by contrast, under-performed the Budget’s assumptions, a detail flagged by the business think-tank Fórum para a Competitividade.

Spending pressures re-emerge

On the outlay side, three lines are doing most of the heavy lifting:

Social transfers – the single biggest item, headed for €27.3 bn this year.

Public-sector payroll – ticking higher in line with new wage agreements and modest head-count growth.

Investment tied to the EU-funded Recovery Plan (PRR) – expected to top €6.8 bn during 2025.Healthcare allocations have also widened to €16.9 bn, while the housing and infrastructure package nears €7.8 bn. Combined, they explain why expenditure growth now slightly outpaces receipts.

Official confidence meets outside scepticism

Finance Minister Joaquim Miranda Sarmento insists the year will still close with “at least” a 0.3 % surplus, citing “prudent and solid” management. Bank of Portugal models are less rosy, pointing to a -0.1 % gap in 2025 and deeper red ink beyond. OECD, IMF and private-sector houses such as Scope Ratings place their forecasts in between, hovering from a marginal surplus to a small deficit. The debate matters because new EU fiscal rules re-enter into force in 2026 and leave little room for error.

How Lisbon compares across Europe

During the spring, Portugal posted the Eurozone’s third-largest surplus after Denmark and the Netherlands. Even after the Q3 slowdown, the country still outperforms heavyweights like Germany, France or Spain, all running deficits. The flip side is that markets now expect fiscal virtue: any sudden slippage could widen sovereign-yield spreads that had recently fallen below Italy’s by more than 150 basis points.

What could swing the full-year balance

• Fourth-quarter tax season: Corporate instalments and VAT on Christmas consumption are decisive.

• Execution of PRR projects: A spending surge in December could erode the surplus.

• EU energy-support claw-back: If Brussels allows unused energy-aid envelopes to expire, up to €500 m could stay unspent.

• Interest-rate trajectory: Lower ECB rates would ease debt-service costs, slightly helping the bottom line.

The road ahead

The next hard checkpoint will be the preliminary 2025 deficit-and-debt notification in late March. Before that, parliament must approve the 2026 Draft Budget, already under the European Commission’s microscope for potentially exceeding the 5 % cap on net expenditure growth. Portuguese households and businesses may not follow every decimal place, but the headline figure will influence borrowing costs, social-policy headroom and ultimately the speed at which the country chips away at a public-debt ratio still near 100 % of GDP.

For now, the summer numbers tell a familiar story: fiscal discipline is holding, yet maintaining it is becoming harder. Lisbon’s margin for error just got a little thinner.