Market Watch
Snapshot of the Portuguese Economy (September)
The Portuguese economy keeps performing, Government figures balanced, External figures balanced and strong momentum in the domestic economy, namely consumption, mainly due to salaries growing above inflation, a gap above 3%; while the impact of lower interest rates is still feeding consumption and finally Tourism continues to perform. So, probably, it is not a surprise that the S&P ratings agency has just decided to increase the rating to A+, however more important, bond investors are already rewarding the performance through Germany’s 10y debt spread, +45pb, below Spain and France…
The “miracle” is mainly justified by the strong tourism performance, Balance of Services surplus, above 10% of GDP, unfortunately Balance of Goods deficit close to 10% of GDP. Meanwhile, despite the budget surplus, government debt, in absolute terms, keeps increasing. So, lower consumption and a lower deficit at the Balance of Goods would be welcome.
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Source: INE, AS Independent Research
Average Salary (quarterly data): Average Gross Salaries are also outperforming, growing around 6% (last data released June 2025; 6.0%YoY; May: +6.1% and April: 6%), showing a small improvement vs. figures slightly below 6% in the prior quarter. Nevertheless, data remains well above core CPI, so real salaries are growing above 3%; feeding consumption and the economic activity (please see graph below).
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Source: INE, AS Independent Research
In a nutshell, external figures remain positive mainly due to Services Balance (11.2% of GDP), however the Balance of Goods remains hugely negative, close to 10% of GDP (a negative reference), and growing faster than Services Surplus, is a major threat in the current economic development model (please see graph below).
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Source: INE, AS Independent Research
Finally, public debt data, keeps surprising negatively, in July €287.9Bn, roughly 97.8% of GDP (LTM), while after Deposits (probably a more accurate measure of public debt), €259.2Bn, roughly 88% of GDP (LTM), +€1.8Bn vs. December 2024, while the budget execution is showing a surplus of €2.3Bn. Even so, the government target at year-end 2025, 91.8% of GDP (currently 97.8%), should be reached.
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Source: INE, BoP, AS Independent Research
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Source: INE, AS Independent Research
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Source: INE, BoP, European Commission, AS Independent Research
Disclaimer
The “miracle” is mainly justified by the strong tourism performance, Balance of Services surplus, above 10% of GDP, unfortunately Balance of Goods deficit close to 10% of GDP. Meanwhile, despite the budget surplus, government debt, in absolute terms, keeps increasing. So, lower consumption and a lower deficit at the Balance of Goods would be welcome.
Job market
Unemployment Rate (monthly data): the job market (seasonally adjusted) regained momentum over the last two months and reached new record levels in July, Active Population, +3.2%YoY (above moving averages) and Employed Population +4%YoY (above moving averages), as a result, unemployed people reached a new low, 323 000, unemployed rate 5.79% and under-utilization rate (a broad concept of unemployed people), 9.98%; also a record low. Finally, the Inactive population, roughly 2.45Mn, -2.4%YoY, is also slowly coming down. In a nutshell, the job market keeps surprising on the upside (please see graphs below).Source: INE, AS Independent Research
Average Salary (quarterly data): Average Gross Salaries are also outperforming, growing around 6% (last data released June 2025; 6.0%YoY; May: +6.1% and April: 6%), showing a small improvement vs. figures slightly below 6% in the prior quarter. Nevertheless, data remains well above core CPI, so real salaries are growing above 3%; feeding consumption and the economic activity (please see graph below).
Source: INE, AS Independent Research
External Data (monthly data)
The Balance of Payments keeps the positive profile, Current Account Balance in June, Surplus last 12 months, 1.25% of GDP; o/w Goods Balance deficit 9.7% of GDP (last 12 months) and surplus at Services, 11.2% of GDP. So, Services Balance surplus remains above Goods balance deficit justifying the bulk of the Current Account Surplus, 1.25% (Primary Income, mainly dividends and interests, is usually negative, however is offset by the Secondary Income, mainly emigrants’ remittances). The Services surplus in June went slightly down, while the Travel Services Account (consolidates in the Services Account) kept a positive performance (+7.7%YoY and 7.3% of GDP.In a nutshell, external figures remain positive mainly due to Services Balance (11.2% of GDP), however the Balance of Goods remains hugely negative, close to 10% of GDP (a negative reference), and growing faster than Services Surplus, is a major threat in the current economic development model (please see graph below).
Source: INE, AS Independent Research
Fiscal Execution and Public Debt (monthly data)
The budget execution in July kept the surplus above last year, €2,327Mn (YtD) vs. a surplus of €940Mn in 2024 (YtD), or 0.59% of GDP on cash basis (LTM). Effective revenues continue to outperform +7.1%YtD (o/w IRS: 14.4%YtD, VAT: +9.3% and Social Security contributions, +8.3%YtD), while Expenditures, +5.1%YtD (o/w Employees, +8.8%YtD; Purchase of Goods and Services: 2.7%YtD and Current Transfers: +3.5%YtD), remain under control, even benefiting form a high base effect.Finally, public debt data, keeps surprising negatively, in July €287.9Bn, roughly 97.8% of GDP (LTM), while after Deposits (probably a more accurate measure of public debt), €259.2Bn, roughly 88% of GDP (LTM), +€1.8Bn vs. December 2024, while the budget execution is showing a surplus of €2.3Bn. Even so, the government target at year-end 2025, 91.8% of GDP (currently 97.8%), should be reached.
Source: INE, BoP, AS Independent Research
Inflation Data (monthly data)
Inflation in Portugal remains under control; between 2.5% and 2.8% (July, headline and core data). Nevertheless, there’s a small upwards pressure, current data, slightly above moving averages, which is probably not a surprise, since the economy is at full employment. So, prices should remain under pressure, namely Services, as salaries are growing above inflation.Source: INE, AS Independent Research
Economic Activity (weekly and monthly data)
After a 2Q25 (second quarter 2025), that surprised on the upside, GDP +1.9%YoY/+60bpQoQ; the 3Q25 should continue to perform, Retail sales (July data, volumes) +7.2%YoY (vs. 2Q25 average: 6.3%), Coincident Indicator index 3Q25 average +3%YoY (vs. 2Q25: +3.8%YoY), car sales, 3Q25 average: +15%YoY and finally Electricity consumption +3.6%YoY (vs. 2Q25: +1.6%). The only discordant note is the Daily Economic Index, that remains on the weak side but was also the case over the 2Q25.Source: INE, BoP, European Commission, AS Independent Research
Disclaimer
This information is merely an auxiliary means of analysis to be used by its recipients, who will be solely responsible for its use, including for any losses or damage that may, directly or indirectly, derive from. The data herein disclosed are merely indicative and reflect the market conditions prevailing on the date they were collected. Thus, its accuracy and timing must absolutely be confirmed before its usage. Any alteration in the market conditions shall imply the introduction of changes in this report. This information/this opinion may be altered without prior notice and may differ or be contrary to opinions expressed, because of using different assumptions and criteria. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. This information is not an offer to sell or a solicitation to enter any deal or contract. It consists of data compiled by or of opinions or estimates from AS Independent Research and no representation or warranty is made as to its accuracy or completeness. Reproduction is not allowed without AS Independent Research permission.
This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. 3Comma Capital does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.
This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. 3Comma Capital does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.
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António Seladas, CFA
3 Comma Capital Blog Contributor
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This post was written in collaboration with António Seladas, CFA. António founded AS Independent Research and provides expert research to clients.
