The Public Finance Council (CFP) considers the budget forecasts in the proposed State Budget for 2027 (OE2027) to be “plausible” but calls for more efficient management of state resources, Notícias ao Minuto reports.
The budget proposal forecasts economic growth of 2.3% this year and 2.1% in 2027, with balanced accounts this year and a surplus of 0.1% in 2027.
The CFP considers the trajectory of the budget balance to be plausible, while also updating its estimate to a balance of 0.1% of GDP for 2026, above the Government’s forecast (0.0%) but below the 0.2% projected in September.
For 2027, the CFP projects a deficit of 0.1% of GDP, which represents a difference of 0.2 percentage points of GDP compared to the Finance Ministry’s forecast.
Different projections
The CFP forecasts that Portugal will exceed the permitted limits under the European Union’s medium-term expenditure rules, contrary to the Government’s projections.
According to the institution, the accumulated deviation in net expenditure growth will reach 1.1% of GDP this year and 2% next year, above the maximum of 0.6% allowed.
The CFP’s forecasts are less optimistic than those projected by the Government in the 2027 State Budget, which points to a cumulative deviation in net expenditure growth of 0.5% of GDP, after applying the permitted flexibility for defence spending, lower than the maximum of 0.6% of GDP, ECO News reports.
The CFP projection does not incorporate the effects of measures “not sufficiently specified,” such as combating VAT fraud in the fuel sector and the remaining revenue from the sale of real estate, as well as the impact on IRS settlement resulting from the extraordinary reduction in withholding tax in November 2026. If these measures were included, “the CFP projection would result in a surplus close to the value of the POE/2027.”
Social Security remains central
The CFP warns about the composition of the balance, noting that the aggregate surplus of public administrations “combines a deficit in the Central Administration of 2.8% of GDP – the largest since 2017, excluding the pandemic years – with surpluses of 2.6% of GDP in Social Security Funds and 0.2% in Regional and Local Administration.”
“Therefore, the overall result remains dependent on the performance of the social security subsector, which is particularly exposed to the economic cycle,” warns the CFP.
Consequently, CFP calls for more efficient management of resources in the different sectors of the State, particularly in the Central Administration, “amplifying the budgetary leeway to address the new needs for public investment in different areas, with a view to preserving fundamental social balances” in Portugal.
In the report, the CFP also points out the difficulty in evaluating some of the document’s forecasts and estimates due to the lack of information or clarification, for example, regarding defence spending and the impact of real estate sales on national accounts, Notícias ao Minuto reports.
The 2027 State Budget proposal will be discussed and voted on in general between 27 and 28 October. The final overall vote is scheduled for 24 November, after the detailed debate process.