Portugal records significant budget surplus spanning January to March period
The euro area has witnessed a modest improvement in its fiscal position, with deficits decreasing and a gradual normalisation of fiscal balances, according to recent data. In the first quarter of 2025, the seasonally adjusted government deficit for the euro area stood at 2.9% of GDP, a decrease from higher levels in the previous quarter.
This decline in deficits can be attributed to a moderate increase in state revenues and a controlled rise in expenditures relative to nominal GDP growth. Despite this positive trend, the overall government debt to GDP ratio in the euro area slightly increased to 88.0% at the end of Q1 2025, compared to 87.4% at the end of Q4 2024.
The data reveals a significant divergence among countries, with sixteen member states seeing their debt ratios increase, while ten experienced declines. The countries with the largest government debt ratios relative to GDP at the end of Q1 2025 are Greece (152.5%), Italy (137.9%), France (114.1%), Belgium (106.8%), and Spain (103.5%). Conversely, the countries with the lowest debt ratios are Bulgaria (23.9%), Estonia (24.1%), Luxembourg (26.1%), and Denmark (29.9%).
The overall trend suggests that deficits are trending downward, and fiscal positions are improving post-pandemic. Forecasts from institutions such as the ECB indicate a continued decline in deficits over the coming years, signalling optimism about fiscal consolidation across the euro area.
It is worth noting that no countries in the euro area had a budget surplus as large as Romania, France, Belgium, Austria, or Poland in the first quarter. Romania, in fact, had the largest public deficit in the euro area, with a deficit of 7.5% between January and March. Other countries with large public deficits include Austria (5.1%), France (5.6%), and Belgium (5.5%).
In contrast, Cyprus recorded the largest budget surplus in the same period, with a surplus of 5.6%. Ireland and Malta also had significant surpluses, with Ireland's surplus at 2.3% and Malta's at 2.1%. Greece, Denmark, Ireland, and Malta also had larger budget surpluses than Portugal in the same period, with Portugal recording the sixth largest budget surplus.
The public deficit in Romania was larger than the deficit in the euro area as a whole between January and March, as well as larger than the deficits in Portugal, Cyprus, Greece, Denmark, Ireland, and Malta in the same period.
In conclusion, the euro area is currently experiencing a moderate fiscal improvement with decreasing deficits, but debt levels remain elevated and vary considerably across member states. The trend towards reducing deficits and fiscal consolidation is expected to continue in the coming years, offering a positive outlook for the region's economic recovery.
The French government has shown a moderate increase in state revenues and a controlled rise in expenditures, contributing to the decreasing deficits in the euro area, as revealed in the data. Despite this optimistic trend, France's overall government debt to GDP ratio slightly increased, placing France among the countries with the highest government debt ratios in the euro area.
