Portugal Posts Surprise €259 Million Q1 Deficit

Portugal's budget position unexpectedly fell into a deficit during the first quarter of the year. The Finance Ministry reported a €259 million shortfall, a dramatic shift from the €5.1 billion surplus recorded in the same period last year. The Ministry attributes this change to decisions made by the outgoing government in the closing stages of their administration.

Overall revenue declined by 7.4% to €25.1 billion, with tax revenues also experiencing a slight decrease of 0.3%. Meanwhile, public expenditures saw a significant increase of 15%, surpassing €25.3 billion.

Despite recording surpluses in both January and February, Portugal has been operating at a deficit since the conclusion of 2022. The center-right Social Democratic Party-led coalition emerged victorious in the March 10th election, narrowly defeating the incumbent Socialist Party.

The Finance Ministry statement notes, "The considerable deterioration of the budget balance... largely stems from decisions and commitments enacted by the former government this year, with many occurring after the March 10th election." Specific details of these measures were not disclosed.

The new government affirms its commitment to distributing budget surpluses to the Portuguese people. They have also pledged tax reductions targeting the middle class, youth, and corporations to drive economic growth while ensuring budget stability.

Increases cited by the General Directorate of Budget include a 16% rise in pension spending, a 7.8% growth in civil servant wages, and a 7.2% increase in goods and services procurement. The Directorate also noted new initiatives implemented to cushion the effects of inflation and "geopolitical shocks", further contributing to spending.

The government projects a 0.3% GDP budget surplus this year, following 2023's surplus of 1.2%. This projection assumes no changes from the previous Socialist policies and excludes measures proposed by the current administration.