Portugal plans to maintain its budget surplus target for 2025, slightly lower than in 2024, enabling continued reduction of its debt ratio, according to the National Statistics Institute (INE) on Tuesday.

INE projects a surplus of 0.3% of GDP in 2025, equivalent to €814 million, down from a revised 0.5% of GDP, or about €1.5 billion, in 2024.

The surplus exceeded expectations in the first half of the year, reaching 1%.

The government has raised wages and pensions while reducing taxes for the middle class and businesses to stimulate the economy, all while aiming to keep the budget balanced, Reuters news agency reports.

As a result, Portugal’s debt-to-GDP ratio is projected to decline to 90.2% by the end of 2025, down from 93.6% last year. Notably, the debt ratio fell below 100% in 2023 for the first time since 2009.

The finance ministry stated that it will keep working to lower public debt, aiming to reach 80% of GDP by 2030.

“We must not interrupt this cycle of balanced budgets and public debt reduction... to reinforce market and investor confidence in our country,” the ministry stated.

Furthermore, over the past two months, Fitch and S&P Global have upgraded Portugal’s credit rating, highlighting its balanced budget and economic resilience.

The economy grew by 0.6% in the second quarter, supported by private consumption and exports, including tourism, bouncing back from a 0.4% decline in the previous quarter.

On a year-on-year basis, GDP rose 1.9%, up from 1.7% in the first quarter.

The Bank of Portugal predicts the economy will expand by 1.6% this year, down from 1.9% in 2024, citing global trade tensions, while the government has maintained its own forecast of 2.1%.