The Portuguese Ministry of Finance is preparing the State Budget proposal for 2027, to be submitted to Parliament in approximately one month. The Government's forecast is to close the year with a null budget balance, although it does not rule out that it may slip into a slight deficit. This projection is validated by the International Monetary Fund and the OECD, being close to the estimates of the European Commission (deficit of 0.1% of GDP) and the Bank of Portugal (0.2%), although the Public Finance Council is more optimistic by pointing to a surplus of 0.1%.
Faced with the possibility of exceptional circumstances, namely related to the economic impact of the war in Iran, the Ministry of Finance acknowledges that additional response measures may need to be accommodated. This possibility had already been admitted internally since April, upon submission of the Annual Progress Report to Brussels.
The Executive, led by Joaquim Miranda Sarmento, guarantees that any contingency plan will not be based on generalized tax increases or indiscriminate cuts to public services. Instead, the Government intends to preserve balance through "rigorous expenditure control and prioritization of measures with the greatest economic and social impact."
The latest data from Statistics Portugal shows an acceleration of the economy in the second quarter, with positive evolution in consumption and exports, high investment dynamism, resilient labor market, and an unemployment rate below 6%. However, the decision not to anticipate in 2026 a new reduction of the additional income tax should be interpreted as a Government choice to maintain fiscal responsibility, with the commitment to reduce income tax in the coming years remaining in place.
