The governor of the Bank of Portugal, Álvaro Santos Pereira, warned this week that crises and shocks are growing more frequent and more violent in the world of finance. He urged the country, government included, to prepare by keeping public finances in order and continuing to reduce debt.
The Finance Minister, Joaquim Miranda Sarmento, weighed in on the topic on Thursday, 8 October, as he presented the proposed 2027 State Budget (OE 2027). After a “very difficult” year in which the government nonetheless “managed to avoid a deficit” and “reduced debt”, he said, the current fiscal position will let Portugal “withstand this external shock far more robustly”.
He then turned to the opposition in Parliament. The budget, he said, cannot be distorted and must come through the negotiations now starting with its balance intact. It would be “very negative for the country” if the proposal were altered, or if measures were added without budgetary cover or offsetting funding. The plan targets a surplus of 0.1% of GDP in 2027 and a fall in debt to 84.5%.
Sarmento said he could see only two parties capable of derailing it. “They can only come from PS and Chega,” he fired back, naming the two largest opposition parties.
“Today we have a fiscal position that will allow the country to withstand an external shock far more robustly than in previous crises, should the economic situation turn more adverse, or an international crisis hit the Portuguese economy directly, as has happened in the past,” he said.
The budget balance was a surplus of 0.7% of gross domestic product (GDP) in both 2024 and 2025, the minister noted. Strip out temporary measures, however, and the picture looks stronger. Those measures include court rulings, credit support, the pensioners’ supplement, Recovery and Resilience Plan (PRR) loans and, in 2026, storm relief. “We have budget balances consistently above 1% of GDP,” Sarmento told a press conference in the Finance Ministry’s Salão Nobre. The room was packed with ministry staff and ministerial aides, who outnumbered the journalists.
He added that public debt is “falling and is four percentage points below the path agreed with the European Commission”, and will probably dip below 85% of GDP next year.
This adjusted calculation, which removes a series of so-called “temporary” effects such as the pension bonus (so, presumably, not to be repeated; we’ll see), allows the government to report primary current expenditure “stabilised as a percentage of GDP between 2024 and 2026”, with balances adjusted for temporary effects above 1% of GDP.
Source: LUSA
Photo credit: Antonio Pedro Santos
