Portugal Reduces 2026 Economic Growth Forecast to 2% and Eyes Budget Balance
Portugal's Updated Economic Outlook and Fiscal Plans
By Sergio Goncalves
Revised Growth Forecasts and Contributing Factors
LISBON, May 4 (Reuters) - Portugal's government has cut its 2026 economic growth forecast to 2% from 2.3% citing severe storms in January and February and a jump in energy prices linked to the Iran conflict, it said in a macroeconomic outlook update sent to Brussels and published on Monday.
Budget Balance Projections
The government now also expects a balanced budget, without deficit or surplus, after earlier predicting a small surplus of 0.1%, down from 0.3% in 2025.
Comparison with Central Bank and Recent Economic Performance
Despite cutting its 2026 growth estimate, the administration remains somewhat more upbeat than the Bank of Portugal that lowered its forecast to 1.8% in April. The economy grew by 1.9% last year.
Economic Challenges and Recovery Measures
Impact of Storms and Export Decline
The economy stagnated in the first quarter compared to the previous three-month period, dragged down by a drop in net exports and affected by the devastating storms in central Portugal.
Government Response and Investment Initiatives
The Finance Ministry expects the slowdown to be offset later this year by reconstruction efforts in storm-hit areas and EU‑funded investment projects.
Private Consumption and Inflation Outlook
Private consumption is expected to slow amid weaker growth in disposable income, higher inflation and persistently high savings, it said.
The government also revised up its 2026 inflation forecast to 2.5% from 2.0%, reflecting a sharp rise in oil and other commodity prices.
(Reporting by Sergio Goncalves; editing by Andrei Khalip)
