Key facts
- Portugal's central bank maintained its 2026 economic growth forecast at 1.8%.
- The 2026 budget deficit projection was lowered to 0.2% of GDP.
- Portugal is projected to achieve a budget surplus of 0.7% of GDP in 2025.
- Inflation forecast for this year was raised to 3.1% due to higher oil prices.
- Public debt is forecast to decrease to 79.5% of GDP by 2028.
The Bank of Portugal maintained its 2026 economic growth forecast at 1.8%, consistent with its March projections and slightly below the anticipated expansion in 2025. The central bank also revised downward its projection for the budget deficit, now expecting it to be 0.2% of GDP in 2026, an improvement from the 0.4% previously forecast in December. This comes after Portugal achieved a rare budget surplus of 0.7% of GDP in 2025.
The bank anticipates the deficit to increase to 0.5% in 2027 and remain at that level through 2028. Growth prospects are reportedly constrained by several factors, including elevated oil prices, heightened uncertainty, tighter financial conditions, and weaker external demand.
Gross domestic product, which saw a 1.9% expansion in 2025, is projected to grow by 1.6% in the subsequent year and 1.8% in 2028. The Portuguese economy experienced stagnation in the first quarter of the year compared to the previous three months, which saw a 0.9% growth. This slowdown was attributed to severe storms and floods in January and February, as well as the impact of the conflict in Iran on energy prices.
The government's outlook for the current year is more optimistic, projecting 2% economic growth and a balanced budget. The central bank has also raised its forecast for EU-harmonised inflation this year to 3.1%, up from 2.8% in March, following 2.2% in 2025. Inflation is expected to moderate to 2.4% next year and 2% in 2028. Public debt is on a downward trajectory, expected to fall to 85.7% of GDP this year from 89.7% in 2025, and further decline to 82.5% next year and 79.5% by 2028.