Portugal says efforts to balance budget, cut debt constrained by storm damage

Portugal will do all it can to keep the budget balanced and reduce public debt, but its efforts are likely to be constrained by the economic impact of devastating storms, Finance Minister Joaquim Miranda Sarmento said on Monday.

Estimating the damage to homes, factories and infrastructure from the storms will take some weeks, Miranda Sarmento told reporters as he arrived at a Eurogroup meeting in Brussels.

"It is very important to help these people and businesses with emergency aid and reconstruction," he said. "We will do everything to keep the budget balanced and continue reducing public debt."

The government initially estimated more than 4 billion euros ($4.74 billion) in direct reconstruction costs and rolled out 2.5  billion euros in loans and incentives to help rebuild after Storm Kristin hit Portugal three weeks ago. The country was then hit by further weather fronts through Saturday.

The government has forecast that the budget surplus will narrow from about 0.3% of GDP in 2025 to 0.1% this year. That would mark Portugal's fourth consecutive year of surpluses, a relatively rare outcome among euro zone economies.

Miranda Sarmento said 2026 was already set to be a "very difficult year" because 2.5 billion euros in loans from the EU recovery funds are weighing on the budget as expenditure, unlike last year when only grants were used, narrowing the government's fiscal room.

The government expects the public debt ratio to drop to 87.8% of GDP this year from 90% last year.

Before the storms, the government forecast the economy would grow 2.3% this year after expanding 1.9% in 2025.

($1 = 0.8436 euros)