Portugal records 0.5% budget surplus in first half of 2026 as GDP growth is revised up

Budget surplus and quarterly rebound

National statistics institute INE reported on 23 September that Portugal recorded a general government budget surplus of 0.5% of GDP in the first half of 2026, amounting to 803 million euros in nominal terms. The result marked a turnaround from the first quarter, which recorded a deficit of 0.7% of GDP following public spending and economic damage caused by storms Kristin, Leonardo, and Marta in late January and February. In the second quarter, public accounts delivered a surplus of 1.325 billion euros, equivalent to 1.6% of GDP, compared with 1.7% in the second quarter of 2025. Total revenue rose by 6.9% year-on-year in the second quarter, while total expenditure increased by 7.0%. INE also noted that capital injections and debt assumptions during the half-year went entirely to general government bodies, leaving the aggregate balance unaffected.

GDP revisions and public debt trajectory

Alongside fiscal data, INE revised economic growth for the second quarter upward by 0.1 percentage points, bringing year-on-year GDP expansion to 2.6% and quarter-on-quarter growth to 0.9%. For the full year 2025, revised annual national accounts established that GDP reached 308.5 billion euros, an increase of 1.9% in real terms. In its second Excessive Deficit Procedure notification sent to the European Commission, INE confirmed that the public debt ratio fell to 89.2% of GDP in 2025, down from 93.0% in 2024 and lower than the initial March estimate of 89.7%. The Ministry of Finance maintained its full-year targets for 2026, aiming for a balanced budget of 0% of GDP and a further debt reduction to 87.5% of GDP, with overall economic growth projected at 2%.

Recovery plan execution and remaining works

In parliament on 23 September, Economy Minister Manuel Castro Almeida addressed lawmakers regarding the execution of the Recovery and Resilience Plan (PRR). The government estimated that projects that could not be completed before the European Commission deadline of 31 August will require 220 million euros in alternative financing. Castro Almeida explained that an assessment will take place in October to allocate alternative funding from the State Budget, Portugal 2030, or other programs. He affirmed that Portugal fulfilled all contractual milestones and targets with Brussels, noting that the country will submit its tenth and final payment request by the end of September to receive nearly 5 billion euros in December.

Concluding the PRR is not having the work done and paid. It is having the work concluded. The payment is supposed to happen in its overwhelming majority by the end of the year.

Contracted targets and project adjustments

The government included extra projects in overbooking during the program to increase the likelihood of completing required targets on time. As an illustration of the adjustment process, the minister cited school construction targets under the European plan.

We had the obligation to build 87 schools. We contracted 102 schools. Those that are completed, effectively, are 89, beyond the target of 87. Therefore, between 89 and 102, there are 13 schools that are beyond the PRR and those do not have to be completed. They are beyond the targets.