Portugal swung to a stronger-than-expected budget surplus of 1.2% of GDP last year from a deficit in 2022, official data showed on Monday, the last day of the Socialist government's eight-year rule in which it posted annual surpluses twice.
As part of the country's excessive deficit procedure reported to Brussels, the National Statistics Institute (INE) also said that Portugal was expected to end this year with a surplus of 0.2% of gross domestic product.
Beefed up by higher tax revenues due to the inflation effect and strong jobs creation, the surplus - Portugal's strongest in its 50 years of democracy - reached nearly 3.2 billion euros ($3.46 billion) last year. Revenue rose 9% and expenditure 5.2%, the INE said.
The fiscally prudent government, which was due to hold its last cabinet meeting on Monday before a new administration takes over after a March 10 election, had predicted a surplus of 0.8% of GDP in 2023 following a budget gap of 0.3% the previous year.
Bank of Portugal Governor Mario Centeno on Friday warned that the country should preserve surpluses stemming from economic growth, which the institution put at 2% this year, and "not consume in the present".
Prime minister-designate and the leader of the centre-right Democratic Alliance, Luis Montenegro, has promised tax cuts for companies and individuals, as well as pay hikes for teachers, police and pensioners.
"Although some permanent expenses are expected to increase, there is some scope for the country to maintain budget surpluses, albeit smaller, as well as the path of reducing public debt," said Paulo Rosa, senior economist at Banco Carregosa.
He added that the 2023 surplus "is a good cushion" for the immediate measures.
The INE said Portugal's debt-to-GDP ratio should drop to 95.1% this year from 99.1% in 2023 - the first year it ended below the 100% mark since 2009.
($1 = 0.9244 euros)
