Brussels cuts Portugal growth view, sees return to deficit

The European Commission expects Portugal’s economy to grow 1.7% in 2026 and the budget balance to slip to a 0.1% deficit, a more cautious outlook than the Portuguese government’s own forecasts.

In its spring forecasts published on Thursday, Brussels said Portugal should still expand faster than the euro zone average despite what it described as adverse shocks at the start of the year, including severe storms in January and February and a sharp rise in energy prices in March and April. The Commission said growth should ease only slightly from 1.9% in 2025 to 1.7% in 2026, before edging up to 1.8% in 2027.

The Commission said the recovery should be supported by storm-repair works and peak use of funds from Portugal’s Recovery and Resilience Plan in 2026, helping investment offset weaker private-sector sentiment. It also forecast inflation, measured by the harmonised index of consumer prices, at 3% in 2026, up from 2.2% in 2025, before slowing to 2.3% in 2027.

On public finances, Brussels said Portugal’s 0.7% surplus in 2025 should turn into a 0.1% deficit in 2026 and a 0.4% deficit in 2027 under a no-policy-change scenario. It linked the deterioration this year to government support measures adopted after the storms, as well as earlier tax cuts in personal and corporate income tax. Even so, the Commission said Portugal would still post one of the lowest deficits in the euro zone.

The Commission also projected Portugal’s public debt ratio to keep falling, to 86.7% of GDP in 2026 and 86.0% in 2027. It warned, however, that risks remain tilted to the downside, including uncertainty over global aviation fuel supply, which matters for Portugal because of the tourism sector’s heavy reliance on air transport.

Originally published at Eco.pt