Portugal's Public Accounts Slipped to a 282 Million Euro Surplus by July, and a 1.4 Billion Euro Hospital Debt Clear-Out Explains Most of the Fall
Parliament's budget office reports a two billion euro swing against last year, almost all of it a cash-basis effect from paying off overdue SNS supplier bills. Social Security, meanwhile, banked its strongest seven months in a decade.
Portugal's public accounts were 282 million euros in the black at the end of July. A year earlier the same seven months had produced a surplus of 2,322 million. The gap, just over two billion euros, is the headline number in a report the parliament's budget office published on Monday, and most of it comes down to a single decision about hospital debt.
Report 14/2026 from the Unidade Técnica de Apoio Orçamental (Technical Budget Support Unit, or UTAO), the independent analysis unit that serves the Assembleia da República (Assembly of the Republic), covers January to July on a public accounting, cash basis. It puts 1,426 million euros of the deterioration down to payments the Serviço Nacional de Saúde (National Health Service, or SNS) made to suppliers to clear overdue bills, financed by capital injections from the State.
Those payments are real money leaving the Treasury, but the underlying obligations were recognised in earlier periods under national accounting rules. Strip them out and the surplus would read 1,708 million euros, and the year-on-year deterioration would be 780 million rather than 2,040 million. UTAO is explicit that the effect "deteriorates the cash balance without corresponding to underlying economic activity".
The revenue side is running hot
Effective revenue rose 7.4 percent to 76,538 million euros, an increase of 5,247 million. Social contributions were up 6.7 percent, indirect taxes 5.0 percent with VAT at 6.8 percent, and other current revenue 18.4 percent. That is strong, but still short of the 8.6 percent annual pace the 2026 State Budget assumed.
The clear miss is capital revenue, which reached only 35 percent of its annual target against a budgeted 72.8 percent increase. UTAO attributes this to the pace of the Plano de Recuperação e Resiliência (Recovery and Resilience Plan, or PRR) and the lag built into validating and certifying European funds. Execution of the PRR reached 2,886 million euros, of which 2,084 million came as EU grants, broadly neutral for the balance because matching revenue offsets the spending, and 621 million as NextGenerationEU loans, which worsen the balance because they are not counted as effective revenue.
The report calls the PRR shortfall the principal risk to the budget path for the rest of the year. The annual target for central administration and social security is 6,900 million euros.
Spending is growing faster than revenue
Effective expenditure rose 10.6 percent to 76,256 million euros, slightly ahead of the 10.4 percent the budget projected for the full year. Beyond the SNS payments, three pressures stand out: investment up 40.4 percent, staff costs up 6.2 percent against a budgeted 4.7 percent, and interest up 10.2 percent, with Treasury bond coupon payments up 16.8 percent on a different payment calendar between the two years.
On staff costs, UTAO makes a pointed observation: overshooting the budgeted figure is "a historical pattern of deviation verified in every year since 2019".
Health spending grew 30.8 percent against a budgeted decrease, driven by the SNS capital injections. The 1,430.4 million euros of capital grants to the Unidades Locais de Saúde (Local Health Units) were all disbursed before July, with no new injections in the month itself. ADSE, the public employees' health scheme, added 24 percent on payments relating to earlier years. Excluding both effects, growth in goods and services purchases runs at about 4 percent rather than the reported 18.9.
Social Security banks its best seven months in a decade
Segurança Social (Social Security) closed July with a surplus of 4,416 million euros, up 1,201 million or 37.4 percent on the same period of 2025, and the highest nominal figure for the period in ten years. Contributions rose 7.3 percent on the back of employment up 2.9 percent in the second quarter and average gross monthly pay up 5.1 percent in nominal terms.
The other half of that result is restraint on the spending side. Pension and benefit expenditure grew 4.4 percent against the 9.0 percent the budget assumed. Pensions alone rose 4.3 percent against a 6.1 percent reference, and non-pension benefits 5.8 percent against 12.2. Unemployment benefit payments rose 2.2 percent, with the number of recipients down 9,416, or 5.3 percent. Two lines ran ahead of forecast: the Prestação Social para a Inclusão (Social Inclusion Benefit) at 16.4 percent and sickness benefit at 9.5 percent.
The Caixa Geral de Aposentações (General Retirement Fund), which covers older public-sector pensions, recorded a 173 million euro surplus, down 6 percent but still better than the 146 million euro deficit budgeted for the full year.
The storm bill, and what has to happen next
Measures responding to storm Kristin reached 555.6 million euros through July, made up of 321 million in actual spending and 234.6 million in foregone revenue, of which 234.4 million was an exemption from the Taxa Social Única (Single Social Tax) employer contribution. Support paid under the calamity measures totalled 555.6 million against 170.8 million a year earlier. Portugal's ombudsman called for a national catastrophe fund after reviewing that response in August.
The arithmetic from here is manageable on paper. The budget targets a deficit of 975 million euros for 2026, which allows a deficit of 1,257 million between August and December. UTAO calls that "compatible with the historical pattern", while noting that it depends on the risks the report identifies. After adjusting for the factors that make the two years hard to compare, the balance reads 1,384 million euros, a deterioration of 1,340 million. The government had already given up on a surplus for the year in July.
