Portugal's Budget Surplus Shrinks to €475.5 Million Amid Slowing Revenue Growth

Budget Surplus Decline

After surpassing one billion euros by July, Portugal's budget surplus has decreased to €475.5 million by the end of August, as reported by the Directorate General of Budget (DGO).

Revenue and Expenditure Trends

The drop in surplus reflects a slowdown in revenue, which has only risen by 7.5% in the first eight months of this year compared to the same period in 2023. Conversely, expenditure has surged by 11.6%. In July, a significant improvement was noted, with the budget balance shifting from a deficit of €2.731 billion to a surplus of €1.059 billion, largely due to a substantial influx of corporate tax (IRC) revenues amounting to €5.7 billion that month.

Impact of IRC Collection

The exceptional IRC collection in July has smoothed out in August, affecting the public sector's cash flows. While state tax revenues showed a growth of 4.7%, this is a decline from the previously reported 9.7%. Key tax revenues such as IRS and VAT have also seen decreases of 1.9% and 1.3%, respectively, despite a resumed carbon tax.

Contributions and Non-Tax Revenue

Contributory revenue has slightly slowed from 10% to 9.7%, while non-tax and non-contributory revenues have accelerated from 16.7% to 19.2%, aided by an extraordinary dividend from Caixa Geral de Depósitos.

Expenditure Growth

Public expenditure growth has increased from 11.2% to 11.6%, with pension costs contributing significantly to this rise. However, the growth in public transfers has decelerated from 13.9% to 13.1%. Notably, spending on personnel has increased from 7% to 7.4%, and acquisitions of goods and services have risen from 10.3% to 11.1%.