Category Archives: News

PRR with Execution Below Expectations

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The Public Finance Council noted that, although Portugal eliminated its fiscal imbalance in 2023 with a surplus of 1.2% of GDP, the implementation of the Recovery and Resilience Plan (RRP) remains below expectations, with only 61.8% of the funds allocated.
Of the total, two-thirds were implemented only in 2023, reflecting a delayed increase in the allocation of resources, limiting the impact on public investment and economic growth.
This situation emphasizes the urgency of accelerating the implementation of the RRP to maximize planned investments and contribute to a sustainable economic recovery.

Public Debt Continues on a Reduction Path

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According to the Bank of Portugal’s Financial Stability Report (November 2024), the public debt ratio fell from 132.5% in 2014 to 97.9% in 2023, with the reduction continuing in the third quarter of 2024.
This positive development contributes to Portugal’s credibility in the markets, reflected in the improvement in debt return rates and the maintenance of its category A credit rating by four international agencies.
However, public debt remains high, and risks associated with external shocks or the economic cycle demand prudence and a commitment to consolidating a sustained reduction path.

Bank of Portugal Projections Point to Return to Deficit

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According to the Bank of Portugal’s June 2025 Economic Bulletin, after a surplus of 0.7% of GDP in 2024, the Portuguese economy is expected to record a budget deficit of 0.1% in 2025, with increases to 1.3% in 2026 and 0.9% in 2027.
The expansionary fiscal stance observed in 2024 is expected to persist in the following years, albeit with some reversal in 2027. The balance sheet points to a further deterioration in the structural primary balance, reflecting the impact of the announced measures and the adverse economic cycle.
This scenario reinforces the need for public spending restraint and clear strategies to ensure fiscal consolidation in the medium term.

CFP warns of future risks despite surplus in 2024

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The Public Finance Council (CFP) emphasizes that, despite a fiscal surplus of 0.7% of GDP in 2024, fiscal policy remained expansionary and countercyclical, which could jeopardize the sustainability of public finances in the future.
The positive balance was driven largely by the exceptional performance of the Pension Funds and the Regional and Local Administration.
However, the deterioration of the Central Administration’s balance, which recorded a deficit of 1.5% of GDP, and the sharp growth in personnel and social benefit spending indicate lasting costs that could put pressure on the budget. Public revenue, while robust, grew unevenly, particularly for ICMS (Tax on Goods and Services) and IRPJ (Corporate Income Tax), and the tax burden reached 35.6% of GDP.
The CFP warns that, in 2026, the country is expected to return to deficits—estimated at 1% of GDP—and public debt is unlikely to resume its downward trend, jeopardizing compliance with European fiscal targets.

Recovery of the Portuguese economy driven by private consumption

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Portugal recorded 0.6% quarter-on-quarter economic growth in the second quarter of 2025, reversing the 0.4% contraction of the previous quarter, according to the National Statistics Institute.
On an annual basis, GDP grew 1.9%, up from 1.7% in the previous quarter. This performance is mainly due to the recovery in private consumption, a key driver of economic activity.
Despite this boost, the Bank of Portugal revised its growth forecast for the full year downward, reducing it from 2.3% to 1.6%, due to tensions in international trade.
The government, however, maintains a more optimistic stance, maintaining its expectation at 2.1%.
This scenario suggests some resilience in the Portuguese economy, but also reinforces the need for policies that foster investment, diversify export markets, and encourage sustainable consumption.

SNS Registers a Hole of €465 Million Until May

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Official data reveal that the deficit of the National Health Service (SNS) almost doubled until May compared to the same period in 2024, reaching a hole of €465 million, reflecting a worsening of €312.4 million compared to the previous year. This result is mainly due to the increase in personnel costs (growth of 13.6%) and the pressure exerted by inflation on medical supplies.

The growth in spending on human resources, partly due to salary updates and partly due to extraordinary hiring in a post-pandemic context, is the main factor in the budgetary deterioration of the SUS. At the same time, operating costs have soared due to the rise in the prices of energy, services and hospital maintenance.

The situation is a cause for concern for healthcare professionals and hospital managers, who warn of the risk of compromising the quality and effectiveness of the services provided. Without additional containment measures, public funding may be insufficient to cover emerging needs, especially in critical specialties.

The government has already admitted to reviewing its forecasts for the public deficit and highlights the urgent need to promote reforms in the healthcare sector, including better financial planning, spending control and investment in digitalization and hospital management.

Treasury Issues Retail Bonds Linked to 6-Month Euribor

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The National Treasury announced the launch of new *Treasury’s Retail Verbrief Bonds* (OTRV), a return on debt issuances aimed at individual investors, with maturities in six years and a rate indexed to the 6-month Selic rate plus a premium of 0.25%. This offering represents an alternative to savings certificates, increasing competition in fixed-income instruments available to the public.

The initiative arose as part of a strategy to diversify sources of financing and attract small savers, at a time when the European Central Bank (ECB) is progressively reducing interest rates. The Institute of Financial Management and Public Debt (IGCP) will fulfill, by the end of May, approximately 47% of the annual issuance plan, which suggests continuity in the capture of national savings.

For investors, the proposal is attractive given the expectation that the Selic rate will remain above 2% for 6 months, offering a return adjusted to sovereign credit risk. Even so, caution is advised, since European money market conditions may evolve, affecting the cost of financing for the State.

This operation reveals changes in the affiliation of domestic investors, who now seem to prefer instruments with variable rates and shorter terms, in contrast to traditional savings accounts linked to the State.

BPI Profits Reach Record 588 Million in 2024

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BPI Profits Reach Record 588 Million in 2024

The Jornal Económico reports that BPI recorded profits of 588 million euros in 2024, an increase of 12% compared to the previous year, reflecting the growth in credit and the performance of the insurance sector.

The strong performance demonstrates the solid recovery of the banking sector after the pandemic, despite challenges such as inflation and regulatory changes.

This positive scenario may translate into greater dynamism in credit operations and increased capital for future investments.

Bank Offers Lower Interest Rates on Deposits than BC Cut

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Bank Offers Lower Interest Rates on Deposits than BC Cut

Data from Jornal Económico indicate that the interest rates offered by Portuguese banks for term deposits are decreasing faster than the ECB’s rate cuts.

On average, the one-year remuneration was **1.605%**, compared to a Euribor of 2.525% in January.

This divergence affects the attractiveness of term deposits and leads depositors to reconsider investment alternatives, reflecting the tension between banks and the ECB in monetary policy.

CFP Expects Deficit in 2026 After Temporary Balance

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CFP Expects Deficit in 2026 After Temporary Balance

The Public Finance Council (CFP) updated its projections and predicts that, after a balanced budget in 2025, the country could return to a deficit of around 1% of GDP in 2026, due to ongoing spending and commitments made throughout the legislature.

The CFP emphasizes that these projections do not yet consider the effects of meeting NATO targets or possible new external tariffs, such as those from the US.

This potential deficit scenario requires a review of fiscal policies, especially with regard to current spending and execution of the RRP investment.