Portugal's fiscal council finds 2027 budget plausible but projects a 0.1% deficit

Revised projections

The Portuguese Fiscal Council (Conselho das Finanças Públicas, CFP) published its assessment on Monday, 26 October 2026, of the 2027 State Budget proposal (OE2027) that the government submitted to Parliament on 8 October. The council now projects a surplus of 0.1% of GDP for 2026, above the government's 0.0% but below the 0.2% it forecast in September. For 2027 it expects a deficit of 0.1% of GDP, while the government projects a surplus of 0.1%, a gap of 0.2 percentage points. The CFP still judges the government's budget balance trajectory plausible, though it warns that several factors could affect how it plays out.

Government 20260

CFP 20260.1

Government 20270.1

CFP 2027-0.1

Government 2026

0 % of GDP

CFP 2026

0.1 % of GDP

Government 2027

0.1 % of GDP

CFP 2027

-0.1 % of GDP

Data from the article text

What the CFP leaves out

The gap comes from measures the CFP did not incorporate because the Finance Ministry had not specified them clearly enough. These include a crackdown on VAT fraud in the fuel sector, which the ministry puts at 300 million euros, the remaining revenue from property sales, and the effect on IRS settlements of an extraordinary cut in withholdings in November 2026. Had those been counted, the CFP says its projection would come close to the surplus in the budget proposal. The council also assumed no increase in defence spending. Its 2027 figures do include the additional IRS rate cut approved in 2026, a reinforcement of the Solidarity Supplement for Older People (CSI), and an update to the minimum existence threshold, offset in part by the RFAI investment tax regime and partial property sale revenue.

Composition of the surplus

The overall public administration surplus rests on social security. The CFP projects a central administration deficit of 2.8% of GDP, the largest since 2017 excluding the pandemic years, while social security funds post a surplus of 2.6% and regional and local administration 0.2%. The council describes this structure in direct terms:

“The dependence of the overall result on the social security subsector, which is particularly exposed to the economic cycle, therefore persists.”

The CFP urges more efficient management in central administration, which it says would widen room to meet new public investment needs. The budget rests on government growth forecasts of 2.3% for 2026 and 2.1% for 2027.

Interest costs and spending

The Finance Ministry projects interest payments rising by 1.5 billion euros in 2027, nearly double the increase shown in the invariant-policies table the government gave Parliament on 31 August, and above the CFP's own projection. The council suspects this figure is overstated, which could free budget room if the ministry's assumptions do not hold. Excluding the base effect of the Recovery and Resilience Plan (PRR), public spending is expected to rise by 0.4 percentage points to 42% of GDP in 2027, mainly because of interest charges.

The CFP also calls the extraordinary November withholding adjustments excessive, arguing they may reduce refunds and increase tax collection notes in 2027.

Risks on both sides

The CFP sees downside risks, including weak wage growth that could undermine IRS and social contribution revenue, and new economic policy measures that could jeopardise budget targets. On the upside, it points to better-than-expected prices or economic activity, lower interest charges and a more constrained use of spending appropriations set aside for budget containment. The council's verdict therefore depends on how these factors balance out, with the 2027 figure still hinging on the three measures it left out.