Portugal’s Budget Surplus Plummets by 95% in 2024

LISBON (Reuters) – Portugal’s budget surplus saw a dramatic decline of 95% in 2024 following the government of Prime Minister Luis Montenegro’s tax cuts for families and businesses, alongside wage and pension increases aimed at stimulating the economy, according to official data released on Friday.

Spending Outpacing Revenue

Spending outpaced revenue by growing 9.2% last year, compared to a mere 2.5% increase in total revenue. This led to a surplus of 354 million euros ($369 million), a sharp decrease from 7.6 billion euros in 2023, based on preliminary figures from the finance ministry.

Despite this situation, the government remains optimistic about meeting its commitment to achieve a surplus of 0.4% of GDP (gross domestic product) in 2024 as agreed upon with the EU. In 2023, Portugal recorded a surplus of 1.2% of GDP, and it aims for a modest surplus of 0.3% of GDP this year.

Economic Growth

The Portuguese economy grew by 1.9% last year, down from 2.5% in 2023, according to the National Statistics Institute’s report on Thursday.

Increased Public Spending

The rise in public spending in 2024 was attributed mainly to:
– A 12.2% increase in social transfers such as pensions
– A 7.9% hike in public sector wages
– A 7.5% increase in the acquisition of goods and services,
according to the finance ministry.

Total tax revenue showed positive growth, driven by:
– An 18% increase in corporate income tax revenue
– A 2.7% rise in value-added tax revenues
– A 9.4% increase in tax revenue from petroleum products
However, personal income tax revenues experienced a decline of 5.1%.

($1 = 0.9594 euros)