Portugal’s Central Bank Maintains Growth Forecast as Fiscal Position Continues to Improve

The Bank of Portugal has maintained its economic growth forecast for 2026 while lowering its budget deficit projections, according to its latest quarterly economic bulletin. Despite challenges stemming from international energy price volatility and weaker external demand, the report suggests that the Portuguese economy remains on a relatively stable path.

According to the latest projections, Portugal’s GDP is expected to grow by 1.8% in 2026, unchanged from the forecast published in March. The central bank also expects growth to slow slightly to 1.6% in 2027 before recovering to 1.8% in 2028.

Although this represents a modest slowdown from the 1.9% growth expected in 2025, Portugal continues to demonstrate a comparatively resilient outlook at a time when many European economies are facing increasing growth pressures.

Fiscal Performance Exceeds Expectations

One of the most closely watched aspects of the report is the continued improvement in Portugal’s public finances.

The Bank of Portugal now forecasts a budget deficit of just 0.2% of GDP in 2026, an improvement from the 0.4% deficit projected in December. At the same time, the country is expected to record a budget surplus equivalent to 0.7% of GDP in 2025.

At a time when most Eurozone countries continue to operate with budget deficits, Portugal’s ability to maintain healthy public finances is increasingly viewed as one of the country’s key economic strengths.

Market analysts note that fiscal stability helps strengthen investor confidence while providing greater flexibility for future public investment and economic development initiatives.

Rising Energy Prices Push Inflation Forecast Higher

The central bank also revised its inflation outlook upward.

Driven by tensions in the Middle East and higher global oil prices, Portugal’s inflation rate for 2026 is now expected to reach 3.1%, compared with the previous forecast of 2.8%. By comparison, inflation in 2025 is projected at 2.2%.

The Bank of Portugal noted that energy prices remain one of the most significant factors influencing inflation in the coming months. At the same time, global economic uncertainty, tighter financial conditions, and weaker external demand may continue to weigh on economic activity.

However, the central bank stressed that broad-based second-round inflation effects have not yet emerged across the economy, although these risks will continue to be closely monitored.

Stability Remains a Key Characteristic of the Portuguese economy

Analysts believe the central message of the central bank’s latest report is one of stability.

While the global economic environment remains uncertain and geopolitical tensions continue to affect energy markets, Portugal’s growth outlook has remained unchanged and its fiscal position has improved further, highlighting the resilience of the country’s economic fundamentals.

In recent years, Portugal has continued to strengthen its public finances, reduce debt levels, attract foreign investment, and advance its energy transition strategy. For investors monitoring the Portuguese market, a stable fiscal environment, predictable economic policies, and continued economic growth remain important long-term fundamentals worth following.

Reference link:

https://www.reuters.com/business/portugal-central-bank-keeps-2026-growth-view-trims-budget-gap-forecast-2026-06-15/

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