Economy to grow 2.3%, inflation to slow to 2.3% in 2025 – central bank

The Bank of Portugal (BdP) predicts that the Portuguese economy will grow by 2.3% this year, a more optimistic projection than the 2.1% indicated by the government, and that inflation will slow to 2.3%.

According to the March Economic Bulletin, released on Thursday, the central bank predicts that the Portuguese economy will grow by 2.3% this year, slowing to 2.1% and 1.7% in 2026 and 2027.

The estimate for this year represents a slight upward revision compared to the December Economic Bulletin, when the BdP projected growth of 2.2%, and it is also a more optimistic outlook for this year than the one put forward by Luís Montenegro’s executive in the state budget for 2025, of 2.1% growth.

“This pace will continue to outpace the euro area average, benefiting in 2025-26 from the easing of financial conditions, the acceleration of external demand and a more concentrated execution of European funds next year,” says the BdP, and the lower growth in 2027 is due to the end of the Recovery and Resilience Plan (PRR).

As for inflation, the BdP estimates that it will slow to 2.3% this year and stabilise at 2% in the following two years, “benefiting from a more contained growth in service prices”.

However, the institution led by Mário Centeno warns that the risks of this projection are significant, at a time when “the invasion of Ukraine and the conflict in the Middle East are compounded by the new geopolitical and commercial orientation of the United States”.

“The materialisation of these risks could mean increases in the price of raw materials, disruptions in supply chains, lower growth in world trade and marked exchange rate fluctuations. Not least, uncertainty could lead companies and families to postpone or cancel investment and consumption decisions,” he points out.