Portugal Central Bank Holds 2026 Growth at 1.8%, Cuts Budget Deficit Forecast
Bank of Portugal Economic Outlook and Fiscal Projections
2026 Growth and Budget Deficit Forecasts
LISBON, June 15 (Reuters) - The Bank of Portugal on Monday kept its 2026 economic growth forecast at 1.8%, unchanged from March and just below 2025's expansion, and lowered the budget deficit projection, while expecting a pick-up in inflation driven by higher oil prices as a consequence of the Middle East conflict.
It forecast a budget deficit of 0.2% of GDP in 2026, compared with 0.4% projected in December. In 2025, Portugal had a budget surplus of 0.7% of GDP - a rare achievement in the euro zone where deficits have been the norm. The central bank sees the deficit widening to 0.5% in 2027 and staying at that level in 2028.
Factors Affecting Growth Prospects
In its quarterly economic bulletin, it said "growth prospects are constrained by higher oil prices, elevated uncertainty, tighter financial conditions and weaker external demand."
It expects gross domestic product, which expanded 1.9% in 2025, to grow by 1.6% next year and 1.8% in 2028.
Short-Term Economic Performance
Portugal's economy stagnated in the first quarter compared to the previous three months, when it grew 0.9%, hit by severe storms and floods in January and February, as well as the negative impact of the war in Iran, which pushed up energy prices.
The government expects the economy to grow 2% this year and to post a balanced budget, with neither deficit nor surplus.
Inflation and Public Debt Outlook
The central bank revised higher its EU-harmonised inflation forecast for this year to 3.1%, from 2.8% in March, which comes after 2.2% in 2025. It sees the pace of price rises easing to 2.4% next year and 2% in 2028.
Public debt is expected to fall to 85.7% of GDP this year from 89.7% in 2025, then decline further to 82.5% next year and 79.5% in 2028.
Reporting and Editorial Credits
(Reporting by Sergio Goncalves; editing by Andrei Khalip)
